Access to Micro-finance for Small and Medium …...development of entrepreneurship. In the course of...

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Regional action plan

„ATM for SME’s – Access to Micro-finance for Small and Medium-sized Enterprises“

The project is implemented through the Interreg Europe programme co-financed by ERDF

December 2018.

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Contents

Contents ............................................................................................................................................ 2

1 General information ...................................................................................................................... 3

1.1 Project summary ..................................................................................................................... 3

1.2 PORA Regional development agency of Koprivnica Križevci County as a partner organisation .................................................................................................................................. 4

1.3 The aim and objective of the project and the Regional Action Plan ...................................... 5

2 Environment for enterprise development ...................................................................................... 7

2.1 An overview of available modes of financing SME investment projects ............................... 7

2.1.1 Introduction ...................................................................................................................... 7

2.1.2 Existing offer available to entrepreneurs in the Koprivnica-Križevci county (and wider) ................................................................................................................................................... 9

2.1.3 Examples of good practice in surrounding counties ...................................................... 21

2.1.4 Support for entrepreneurial projects from the Operational Programme Competitiveness and Cohesion 2014-2020 (OPCC), financed from the European Regional Development Fund ................................................................................................................................................. 24

2.1.5 Concluding SWOT analysis ........................................................................................... 28

3. Regional Action Plan .................................................................................................................. 31

3.1 Introduction to the measures contained in the Action Plan .................................................. 31

3.2 Action Plan ........................................................................................................................... 33

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1 General information

1.1 Project summary

Project: ATM for SME’s – Access to micro-financing for small and medium enterprises

Name of partner organisation: PORA Koprivnica-Križevci County Regional development agency

Other partners: Fejér Enterprise Agency (lead partner, Hungary) KIZ SINNOVA for Social Innovation GmbH (Germany) ZALA County Foundation for Enterprise Promotion (Hungary) Ministry of Finance (Hungary) European Business and Innovation Centre Burgos (Spain) Autonomous Region of Sardinia (Italy) Microfinance Norway (Norway) Marshall office of Swietokrzyskie Region (Poland) European Microfinance Netowork (Belgium)

State: Republic of Croatia NUTS 2 region HR04 Continental Croatia Name of contact person: Name: MAJA BELKOVIĆ DOŠEN

Email address: [email protected] Tel.: +385 48 621 978

Entity procuring the draft Regional Action Plan

PORA Koprivnica-Križevci County Regional development agency

Contractor: Ecorys Croatia d.o.o. Experts hired to draft the Regional Action Plan

Maja Hranilović Jasminka Keser Vlatka Čolak

Name of contracting contact person:

Name: MAJA HRANILOVIĆ Email address: [email protected] Tel.: +385 1 8892 350

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1.2 PORA Regional development agency of Koprivnica Križevci County as a partner organisation

As the partner organisation, PORA Regional development agency of Koprivnica Križevci County, which represents the Republic of Croatia on the "ATM for SMEs – Access to micro-financing for small and medium enterprises", is an important stakeholder in the development of the Koprivnica-Križevci County.

PORA is the central institution coordinating the management of development in the Koprivnica-Križevci County. As part of its primary activities, as a regional coordinator, it performs the following public tasks:1

– drafts the County development strategy and other strategic and development documents for the County, as well as the implementation documents for which the founder and/or co-founders authorise it, – ascertains the conformity of county development strategic planning documents with higher-level strategic planning documents, and adopts decisions confirming conformity, – provides professional assistance on drafting and implementing programs of support for public administration bodies and public institutions in its county founded by the Republic of Croatia or the county in preparing and implementing development projects in the interest of the development of the county, especially projects co-financed by EU structural and investment funds, – provides professional assistance on drafting and implementing the development projects of the public administration bodies and public institutions in its county founded by the Republic of Croatia or units of local and regional self-government – projects in the interest of the development of the County, as well as joint development projects in the interest of the development of more than one county, – implements county development programmes for which it is authorised by the founder and/or co-founders – implements the Ministry's and other central state administration bodies' programmes that concern more even regional development, – enters development projects significant to the County's development into the central electronic register of development projects, – coordinates the entry of other public bodies in the central electronic register of development projects, – monitors and observes the status of the projects of all the users in the county in the central electronic register of development projects,

1 Pursuant to the Law amending the Republic of Croatia Regional Development Act (OG 123/17).

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– performs professional and advisory tasks related to the implementation of the County development strategy and other strategic, development and implementation documents for the County, and report to the founders and the Ministry on their implementation, – cooperates with the Ministry and all other relevant stakeholders on tasks related to strategic planning and managing development in the County, – harmonises the operation of local self-government units in the County related to regional development, – performs administrative and professional tasks necessary to the County partnership, and – participates in the work of partnership councils.

Considering PORA's role in this projects, its following functions may be singled out:2

- strengthening a positive entrepreneurial and investment climate, - promoting the Koprivnica-Križevci County and the competitiveness of the economy in the

Koprivnica-Križevci County, - increasing the absorption capacities of all potential users in the Koprivnica-Križevci

County to use EU funds, - implementing programmes and projects to support the development of entrepreneurship

and investment, active participation in designing and drafting projects focused on the development of entrepreneurship.

In the course of the project, PORA has ensured that Croatian experiences in the field of micro-financing of small and medium enterprises are presented to the other partner institutions, and, using the interregional cooperation within the framework of this project, employed the examples of good practice from other states to draft a Regional action plan for the needs of entrepreneurs in the Koprivnica-Križevci County, that is, applicable to the needs of all Croatian entrepreneurs.

1.3 The aim and objective of the project and the Regional Action Plan

The overall objective of the ATM for SMEs project is “to improve the implementation of policies addressing enterprise development or sustainable employment in the participating regions, so that they can contribute to better access to local micro-finance programmes for SMEs and sole proprietorships.”3

Shared good practices from different regions should be inspiring for the local authorities and business support organisations, to develop regionally-specific policies and instruments for

2 www.pora.com.hr/o-nama/ 3 https://www.interregeurope.eu/fileadmin/user_upload/tx_tevprojects/library/file_1503479630.pdf

http://www.pora.com.hr/o-nama/

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addressing the key challenges for entrepreneurs: access to finance and availability of adequate business development services.

The Regional Action Plan, produced by each of the project partner institutions, should specify what is to be done in the specific region, taking into consideration the regional specificities in relation to the needs of the entrepreneurs and the business environment in general, to ensure that the lessons learnt from this interregional cooperation project would be operationalised.

The Regional Action Plan specifies how the lessons learnt from the cooperation will be implemented in order to improve policies and related instruments within the respective regions. Each action within the Regional action plan includes: - a short description of the good example on which the action is based, - description of the action, - the stakeholders involved and their roles, - the time needed for the development and implementation of the action, - related costs and sources of finance (if applicable).

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2 Environment for enterprise development

2.1 An overview of available modes of financing SME investment projects

2.1.1 Introduction

This chapter addresses the existing mechanisms of financing small and medium enterprises (hereinafter: SMEs) by presenting the credits and investment vehicles on offer on the financial market, both for the Koprivnica-Križevci County (hereinafter: KKC) and the wider region. The KKC is among the counties whose system of entrepreneurship is better developed than average. Table 1 provides an insight into the trend of the growth in the number of entrepreneurs over the past two years, which shows the potential growth in the number of entrepreneurs, which needs to be further worked on.

Table 1. Number of entrepreneurs in North-West Croatia

County Number of

entrepreneurs in 2016 Number of entrepreneurs

2017 Varaždin 3.577 1.774 Međimurje 3.105 3.233 Krapina-Zagorje 2.042 2.103 Koprivnica-Križevci 1.779 1.809

Source: Croatian Bureau of Statistics

2.1.2 Economy

In terms of structure of the economy, the processing industry accounts for 26%, followed by agriculture, commerce and construction. The trend for entrepreneurs' business dealings in the Koprivnica-Križevci County corresponds to economic shifts at the national level, where the rise in demand has led to larger domestic and external revenue; growing number of employed people, an investment growth rate of 35.5%, with investments having reached the highest nominal value since the County was constituted; strengthening competitiveness, with export in goods having risen by 19.3% and an external trade surplus of 153.5 million USD.

On 31 December 2017, the number of registered unemployed persons was 3,578, which is the lowest it has been since 1991.

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Alongside the 1,809 companies in the County, there are also 1,242 sole proprietorships active, a majority of those, 573, in the service sector, employing a total of 3,061 persons. Out of the total area of 747 ha in the County designated as commercial zones, 502 ha are connected to municipal utilities. Of these, 289 ha are used for business activities by 170 entrepreneurs, employing around 4,900 workers.4

Today, there are a total of 38 entrepreneurial areas in the KKC, spread across 22 local self-government units.5

4 "Gospodarstvo Koprivničko-križevačke županije u 2017.godini" [The economy of the Koprivnica-Križevci County in 2017], www.kckkzz.hr 5 https://pora.com.hr/poduzetnicke-zone/

http://www.kckkzz.hr/

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2.1.3 Existing offer available to entrepreneurs in the Koprivnica-Križevci county (and wider)

Support through the County and national financial institutions

Table 2. Examples of micro-finance instruments of the Koprivnica-Križevci County6

Title CONDITIONS Subsidy LOW VALUE SUBSIDY FOR HEALTH AND STRENGTHENING THE GENETIC POTENTIAL IN CATTLE BREEDING

Legal and natural persons in the agricultural sector who submit a

request for subsidies 30%

OPEN CALL FOR AN ONGOING T 100010 PROJECT – INCENTIVISING NEW PERENNIALS

Subsidising the planting of new perennial crop plantations

The overall subsidy per fruit seedling is 40% of the average

seedling price, not exceeding 12.00 HRK, or 32.00 HRK for walnuts.

The subsidy cannot exceed 50,000.00 HRK

SUBSIDIES FOR THE CONSTRUCTION OF COMMERCIAL BUILDINGS BY CO-FINANCING MAIN CONSTRUCTION PROJECTS BY BOTH THE PUBLIC AND PRIVATE SECTOR

Co-financing the costs of creating concept and/or detailed

designs for constructing commercial buildings

30% of the value of the costs, up to 30,000.00 HRK

COUNTY CRAFTS AND BUSINESS FAIRS

Co-financing the costs of exhibition area, accommodation

and transport The entire costs, up to 10,000.00

HRK

SUBSIDY FOR ACHIEVING STANDARDS FOR ECONOMIC SIZE OF FARMS

Buying agricultural land, buying cattle, buying bee colonies,

buying protected space for the production of vegetables, fruit,

mushrooms and flowers with the accompanying equipment and

planting perennial crops (seedlings)

50%, up to 50,000.00 HRK

Source: www.kckkzz.hr (Open calls and bidding)

6 www.kckzz.hr

http://www.kckkzz.hr/

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Table 3. Overview of enterprise loans through commercial banks7

Type of long-term loan Loan purpose Maximum

amount Interest

rate

Repayment

deadline

ER

STE

& S

TE

IRM

AR

KIS

CH

E B

AN

K D

.D.

Entrepreneurial start-up loan

A programme intended for unemployed persons wishing to become entrepreneurs, that is, novice entrepreneurs who started their own business within the past two years. It entails free support on outlining and carrying through a business idea, and involves online education activities; tools, instructions and counselling for drafting a business plan and financing.

Depending on the project and the client

Depending on the project and the client

Up to 7 years

Loans in collaboration with the CBRR – Youth entrepreneurship

Long-term credit financing for basic material and immaterial property and permanent working capital of up to 30% of the total value of the loan.

From 80,000.00 HRK to 700,000.00 HRK

2% per annum

Loans in collaboration with the CBRR – Women entrepreneurs

Long-term credit financing for basic material and immaterial property and permanent working capital of up to 30% of of the total value of the loan.

From 80,000.00 HRK to 700,000.00 HRK

2% per annum

Up to 12 years

Loan for financing ongoing business activities, revolving credits and pre-export finance with a CBRR insurance policy

Financing export activities and pre-export finance

Depending on the loan user's creditworthiness


Up to 2 years

Long-term all-purpose micro-loans Nonpurpose.

Up to 150,000.00 HRK

Up to 7 years

Mortgage loan Nonpurpose.

From 37,000.00 HRK to 518,000.00 HRK

Up to 7 years

7 www.erstebank.hr; www.otpbanka.hr; www.rba.hr; www.zaba.hr

http://www.otpbanka.hr/

http://www.rba.hr/

http://www.zaba.hr/

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Loans for financing photovoltaic systems for producing electricity

Buying and installing grid-connected photovoltaic systems for producing electricity, drafting project documentation

Up to 750,000.00 HRK 10 years

Credit financing in cooperation with the EFSE

Financing investment in buying, building or expanding facilities, procurement of equipment and vehicles, as well as permanent working capital.

Up to 740,000.00 HRK

OTP bank Loan for purchasing

agricultural machinery Purchasing new or used agricultural machinery.

From 2,000.00 EUR

1-7 years

Long-term tourism loan

To prepare for the holiday season and provide high quality services, with the option of various purposes – buying, adapting, equipping and furnishing tourist accommodation.

From 5.000 EUR

1-15 years

Investment loans Investment spending

Depending on the legal entity's creditworthiness

1-10 years

Sunny loans for small enterprises and sole proprietors

For buying and installing solar systems for electric and thermal energy production, under an electrical energy purchase agreement previously entered into with the Croatian energy market operator (HROTE)

From 5,000.00 to 150,000.00 EUR 14 years

Raiffeisen bank

Financing investments

Modernising the existing facilities, building or buying real estate, acquisition of new equipment or refreshing the vehicle fleet

5,000 to a maximum of 200,000 EUR.

Up to 10 years

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Type of short-term loan Loan purpose Maximum amount

Interest rate

Repayment

deadline

Ers

te &

Ste

irm

arki

sche

Ban

k d

.d.

Framework loans

Flexible withdrawal of necessary liquid funds, to be used in line with the principle of framework loans made out to citizens' current accounts. It is used to finance occasional needs for additional working capital and occasional maintenance of liquidity.


The agreed interest rate is paid only against the amount of funds in use.

Up to 12 months Revolving credit

Financing occasional needs for additional working capital for occasional maintenance of liquidity and export operations and pre-export financing.


Current operations financing loans

Liquidity maintenance (e.g. disbursal of salaries, paying suppliers...), financing working capital needs, export operations and pre-export financing.

Up to 12 months / Up to 150 days

Short-term limit

Limit within which the client may be approved any kind of product, with a maturity of up to 12 months, as defined in the agreement.

Up to 12 months

Current operations financing, revolving and pre-export financing loan with a CBRR insurance policy

Export operations and pre-export financing

Loans in cooperation with the CBRR – credit financing preparing for export

Financing working capital designated for preparing production to start exporting.

From 3% per annum

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Loans in cooperation with the CBRR – Liquidity

Settling liabilities with suppliers, financial institutions, the state, and settling other short-term liabilities.

Depending on the available CBRR funds, the opinion of the commercial bank and on the possibility of using a low-value subsidy

4% per annum

3 or 6 months

Zag

reba

čka

bank

a d

.d.

Short-term loan for business financing

Financing seasonal work, contracted delivery of goods and services, working capital needs, agricultural investment and refinancing loans of equivalent purposes.


Variable Up to 12 months

Short-term all-purpose micro-loan Nonpurpose.

Up to 150,000.00 HRK

Loan to develop tourism services development

Financing preparations for the holiday season in the current year, as well as other investments in tourism.

At least 18,500.00 HRK, and the maximum amount depends on the loan user's creditworthiness

Extension of loans in cooperation with the EFSE

For working capital and other short-term needs.

Up to 740,000.00 HRK

Short-term loans: loans for small enterprises and sole proprietors Financing working capital.


Depending on the client's status

Up to 1 year

Micro-credits: Credits for small enterprises and sole proprietors Nonpurpose. 20,000 EUR

Depending on the client's status

36 months

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Entrepreneurial loans

Intended for notaries public, lawyers, accountancy services, certified auditors, pharmacists, dentists, doctors, veterinarians and members of the Croatian Chamber of Architects and Engineers in Civil Engineering who earn most of their income from their primary work.

From 20,000 HRK (depending on the loan user's creditworthiness)

The regular interest rate level is determined by the bank's Decision on interest.

Up to 12 months

Agricultural production loan

Agricultural loans for financing spring and summer sowing, and other agricultural production.

From 10,000.00 HRK.

Up to 12 months

Agricultural loan on grounds of realised rights to agricultural subsidy

Family agricultural holdings, sole proprietorships or enterprises which perform an agricultural activity, and are beneficiaries of state subsidies (incentives) in agriculture.

The amount is determined on the basis of the amount of agricultural subsidies paid out.

18 months

Raiffeisen bank

Working capital loan Working capital

From 40,000 HRK up to a maximum of 1,500,000 HRK

Up to 24 months

Table 4. Overview of HBOR loans8

HBOR LOANS

START-UPS

Intended for entrepreneurs establishing a sole proprietorship, company or family agricultural holding for the first time, who are under 55, do not own another company, sole proprietorship or family agricultural holding, are not co-owners in other companies, sole proprietorships or family agricultural holdings with a stake exceeding 30%.

Amount At least 80,000.00 HRK, at most 800,000.00 HRK

Interest rate * 2% annually with optional discounts – 0.2 p. p. for youth employment – 0.422 p. p. for innovative small mid-cap companies – 0.572 p. p. for innovative small and medium-sized companies.

Grace period - up to 3 years - up to 5 years for planting and/or restructuring perennial crop

plantations Repayment deadline Up to 14 years, including the grace period

8 www.hbor.hr (HBOR - Croatian Bank for Reconstruction and Development)

http://www.hbor.hr/

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Security instruments

Bonds and promissory notes; deposit or fiduciary title to property with a property insurance policy whose transferability is restricted to the CBRR; bank guarantees; HAMAG-BICRO guarantees; for loans of up to 100,000.00 HRK secured with a HAMAG-BICRO guarantee covering 80% of the loan principal, loan users' bonds and promissory notes and consent on confiscation of owner's salary; for loans above 100,000.00 HRK, two creditworthy guarantors and other security instruments common in banking. In case of payment through commercial banks, the end-user agrees the security instruments with the commercial bank.

Purpose

Fixed assets Tangible assets

- initial funding - land, buildings - equipment and devices - nucleus breeding unit, planting perennial crops

Intangible assets - development of products or services, patents, licences,

concessions, copyright, franchises Permanent working capital of up to 30% of the total value of the loan.

ENVIRONMENTAL PROTECTION

Intended for local and regional self-government units, utility companies, commercial companies, sole proprietors, family agricultural holdings and other legal persons.

Amount Depends on the CBRR's lending capacity, the specific investment programme, the loan user's creditworthiness, and the value and quality of the proposed security instruments. No less than 100,000.00 HRK.

Interest rate *

1.75% ANNUAL, FIXED for local and regional self-government units and companies, agencies and institutions under their majority ownership and/or the majority ownership of the RC that are in areas of special state concern or assisted areas – local self-government units belonging to the I, II, III or IV group, or hilly and mountainous areas and islands. 2% ANNUAL, FIXED for all other local and regional self-government units and companies, agencies and institutions under their majority ownership and/or the majority ownership of the RC. 4% ANNUAL for all other economic entities. Discount options: - 1 p. p. for new investment – 0.2 p. p. for youth employment – 0.422 p. p. for innovative small mid-cap companies – 0.572 p. p. for innovative small and medium-sized companies.

Grace period Up to 3 years Repayment deadline Up to 14 years including the grace period


Bonds and promissory notes; deposit or fiduciary title to property with a property insurance policy whose transferability is restricted to the CBRR; bank guarantees; HAMAG-BICRO guarantees; RC guarantees, and other security instruments common in banking. In case of payment through commercial banks, the end-user agrees the security instruments with the commercial bank.

Purpose

Fixed assets - initial funding - land - buildings - equipment and devices

Permanent working capital up to 30% of the total value of the loan.

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SMALL AND MEDIUM ENTREPRENEURSHIP

Companies, sole proprietors, family agricultural holdings, natural persons independently performing business activities. Cooperatives and institutions Legal and natural persons that have been active in business for less than 2 years, if they have previous business experience as owners and/or founders.

Amount 80,000.00 – 8,000,000.00 HRK

Interest rate *

2% ANNUAL for entities investing in areas of special state concern or assisted areas – local self-government units in the I, II, III or IV group, or hilly and mountainous areas and islands, that have proved their market competitiveness by successfully selling in the domestic and/or foreign market, with discount options - 0.2 p. p. for youth employment – 0.422 p. p. for innovative small mid-cap companies – 0.572 p. p. for innovative small and medium-sized companies. 4% ANNUAL for all other small and medium enterprises, with discount options – 1 p. p. for new investment – 0.2 p. p. for youth employment – 0.422 p. p. for innovative small mid-cap companies – 0.572 p. p. for innovative small and medium-sized companies.

Grace period - up to 3 years - up to 5 years for planting and/or restructuring perennial crops

Repayment deadline - up to 12 years including the grace period - in justified cases, where the investment study indicates a need for

longer maturity and grace period, the repayment deadline may be extended to 17 years, including a 4 year grace period.


Bonds and promissory notes; deposit or fiduciary title to property with a property insurance policy whose transferability is restricted to the CBRR; bank guarantees; HAMAG-BICRO guarantees, and other security instruments common in banking. In lending through commercial banks, the commercial bank determines the security instruments.

Purpose

Fixed assets Tangible assets

- initial funding - land, buildings - equipment and devices - nucleus breeding unit, planting perennial crops

Intangible assets - development of products or services, patents, licences,

concessions, copyright, franchises Permanent working capital of up to 30% of the total value of the loan..

CREDIT FINANCING THE PREPARATION OF AGRICULTURAL PRODUCTION

Natural persons and legal entities (family agricultural holdings, sole proprietorships, companies, co-operatives) in the category of micro-, small or medium-sized enterprises.

Amount The minimum loan amount is HRK 50,000.00. The maximum loan amount is not limited and depends on the availability of the CBRR's funds.

Interest rate * 3% per annum

Repayment deadline Up to 12 months

Security instruments The end-user agrees the security instruments with the commercial banks as part of agreeing regular security instruments (bonds, promissory notes, deposits or fiduciary title to property, bank guarantees and other security instruments customary to banking).

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Purpose

Financing of the working capital needed for smooth agricultural production, as follows:

- for current production activities (purchase of raw materials, base materials and other materials)

- for the purchase of agricultural products

Table 5. Overview of HAMAG BICRO financial instruments9

ESIF LOANS

ESIF Micro investment loan Intended for micro- and small business entities and natural persons who do not have a registered entity at the time of the request

Amount From 1,000.00 EUR to 25,000.00 EUR

Interest rate * 0.5% – 1.5%

Grace period Up to 12 months if the repayment deadline is longer than 2 years

Repayment deadline Up to 5 years including the grace period

Security instruments Promissory note, and other security instruments depending on risk assessments.

Subsidy De minimis

Purpose Fixed assets (tangible and intangible assets)

Working capital – up to 30% of the value of the loan

ESIF Small loan Intended for micro-, small and medium business entities and natural persons who do not have a registered entity at the time of the request.


Interest rate * 0,5% – 1,5%




Subsidy De minimis

9 https://hamagbicro.hr/financijski-instrumenti/ (HAMAG BICRO – Croatian Agency for SMEs, Innovations and Investments)

https://hamagbicro.hr/financijski-instrumenti/

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Purpose Fixed assets (tangible and intangible assets)

Working capital – up to 30% of the value of the loan

ESIF Micro-loan for working capital Intended for micro- and small business entities


Interest rate * 1,5% – 3,5%




Subsidy De minimis

Purpose Working capital – 100% of the value of the loan

Small loan for rural development Intended for micro-, small and medium business entities

Amount From 25,000.01 EUR to 50,000 EUR

Interest rate * 0.5% and 1.0%, depending on the level of development of investment of the local self-government unit (0.1% for investment in the dairy industry)

Grace period Up to 12 months if the repayment deadline is longer than 12 months

Repayment deadline Up to 10 years


Subsidy De minimis, public subsidy

Purpose - fixed assets - working capital up to 30% of the value of the loan

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Subsidies through the Croatian Employment Service (CES)10

Support for self-employment – phase 2

Specific objective: 8 and 2 Increasing sustainable self-employment of unemployed persons, especially women Value of the operation: 949,000,000.00 HRK Duration of the operation: From 31 October 2018 to 30 October 2022. The general objective of the operation is to facilitate unemployed persons' access to self-employment and stimulate sustainable self-employment by providing financial incentives and continuous support. Increasing the number of self-employed persons in CES records is also an objective. Target groups: Unemployed persons registered with the CSE Operation activities: CSE self-employment subsidies are granted to unemployed persons with a developed entrepreneurial idea, in order to cover the costs of starting a business entity and its operation. A self-employment advisor provides professional assistance and counselling to all people interested in self-employment, so group briefings and individual counselling for all those interested in self-employment will be conducted in all local and regional offices, in line with CSE standard procedures, described in its internal regulations. Pursuant to the Conditions and ways of utilising funds for implementing the measures for 2018, subsidies amounting to 55,000 HRK will be granted, that is, up to 70,000 HRK in case it is combined with professional job training; up to 110,000 HRK for starting a sole proprietorship or freelance work (up to two persons); up to 220,000 HRK for association in a commercial company (up to 4 persons); and up to 275,000 HRK for association in cooperatives (for 5 persons).

Support for self-employment

Name of the project (operation): Support for self-employment Name of the EU operational programme and fund: Operational Programme Efficient Human Resources 2014-2020, European Social fund (ESF) Project holder: Croatian Employment Service Implementation period: from 5 November 2015 to 31 December 2018. Total value of the project (operation): 175,950,000.00 HRK The EU's share in financing: 149,557,500.00 HRK Short description of the project (operation): Data indicate that during periods of high unemployment or job scarcity, an increasing number of unemployed persons decide to start their own business. Reluctance to start one's own business arises due to a lack of funding, a lack of the necessary expert know-how for starting and managing business, difficulties developing a business idea and sustainable business plans. This especially represents an obstacle to unemployed people, who need better-targeted 10 http://www.hzz.hr/default.aspx?id=19186

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support and guidance, as well as additional knowledge on starting and managing a business. The Support for self-employment measure was designed for this reason, with the objective of providing support to unemployed people in starting a business, by providing educational workshops for acquiring necessary knowledge, and securing financial subsidies, as well as provision of support after starting one's own business with a view to its sustainability.

The objective and expected results of the project (operation): The objective of the operation is to increase the number of self-employed persons in CSE records by providing financial assistance and continuous support in, and over the course of, self-employment. Expected results: 6,250 unemployed persons taking part in educational workshops, 4,513 self-employment subsidies granted.

Implementation of active employment policy measures for long-term unemployed young people

Project holder: Croatian Employment Service Implementation period: from 5 November 2015 to 31 December 2018. Total value of the project (operation): 111,285,651.60 HRK The EU's share in financing: 94,592,803.86 HRK Short description of the project (operation): The Croatian national Youth Guarantee Implementation Plan, which represents a comprehensive plan of activities focussed on young people under 30 years of age, has focused on rapid response to youth unemployment. However, since nearly half of all unemployed youth fall under the category of long-term unemployment, the need has arisen to focus activities towards this specific target group. With this operation, the Croatian Employment Service has secured financing and prepared a series of activities, services and interventions within the framework of 5 types of active labour market policy measures, which are to stimulate long-term unemployed young people's inclusion in the labour market. The operation is intended for persons up to 25 years of age, who have been registered as unemployed for longer than 6 months, and for young people aged 25-29 who have been unemployed for more than 12 months. The objective and expected results of the project (operation): The overall objective of the operation is to support the implementation of the active employment policy aimed at long-term unemployed young people aged 15 to 29. It is planned that the operation cover 3,767 long-term unemployed young people, thus increasing the employment rate and improving their integration in the labour market by stimulating further education, acquisition of new competences and skills, involving them in public works and job training programmes, through employment subsidies, and encouraging self-employment.

Implementation of active employment policy measures for youth employment (YEI)

Name of the project (operation): Implementation of active employment policy measures for youth employment (YEI)

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Name of the EU operational programme and fund: Operational Programme Efficient Human Resources 2014-2020, European Social Fund (ESF), Youth Employment Initiative Project holder: Croatian Employment Service Implementation period: From 5 November 2015 to 31 December 2018. Total value of the project (operation): 757,656,000.00 HRK The EU's share in financing: 376,253,221.14 HRK from the European Social Fund and 315,005,151.60 HRK from the Youth Employment Initiative Short description of the project (operation): The Implementation of active employment policy measures for youth employment (YEI) operation covers employment stimulation activities through measures of job training without employment, education for the labour market, employment subsidies, implementing public works programmes, and support for self-employment. The operation is aimed at young unemployed persons (15-29) who have been registered as unemployed for up to 4 months. The objective and expected results of the project (operation): The overall objective of the operation is to support the implementation of the active employment policy aimed at young people aged 15 to 29. The expected results are increased level of employment and better integration of unemployed young people (15-29) in the labour market, by means of stimulating further education and acquisition of new competences and skills, involvement in public works and job training programmes, employment subsidies, and encouraging self-employment.

2.1.4 Examples of good practice in surrounding counties

Regardless of the commercial banks' and development institutions' (CBRR and HAMAG BICRO) range of services, there are numerous examples where the counties themselves have taken on an active role, stimulating employment and development of the labour market in various, frequently innovative ways. There follows a short overview of some of the existing examples of good practice in the neighbouring counties.

Krapina-Zagorje

Informiraj i kreiraj (Inform and create!) 4.0

- Project implementation period: 01 November 2017 – 31 October 2018. - Total value of the agreed project: 95,500.00 HRK - The EU's share in financing the agreed project: 0.00 HRK

The overall objective of the project is to contribute to the social development of the local and regional community by providing a stimulating environment for the young and for civil society organisations in order to create the conditions that will contribute to satisfying the needs of the young connected to increasing quality of life.

http://www.hzz.hr/default.aspx?id=48638









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Međimurje

Istakni se, osvoji posao (Stand out, win a job) 2

- Project implementation period: from 14 May 2018 to 14 November 2020. - Total value of the agreed project (operations): 942,208.33 HRK - The EU's share in financing the agreed project: 942,208.33 HRK

The objective is to improve the job-seeking competences and skills of unemployed members of vulnerable groups in Međimurska County.

Empowering for Growth III

- Project implementation period: from 14 May 2018 to 14 November 2020. - Total value of the agreed project (operations): 1,707,885.43 HRK - The EU's share in financing the agreed project: 1,707,885.43 HRK

The objective of the project is to influence the employability of young unemployed people who left the education system to enter the labour market.

Prvi sam izbor na tržištu rada - obrazovan, kompetentan i lako zapošljiv (I am first choice in the labour market – educated, competent and easily employable)

- Project implementation period: from 25 January 2018 to 25 July 2019. - Total value of the agreed project: 1,264,035.45 HRK - The EU's share in financing the agreed project: 1,264,035.45 HRK

The project objective is to increase the target group's level of employability and competitiveness in the labour market by attaining basic qualifications and/or higher-level qualifications.

B light

The B Light Grant scheme is a project financing small and medium enterprises (SMEs) in the border areas between Hungary and Croatia, part of the Interreg V-A Hungary-Croatia Co-operation Programme 2014-2020.

The B light project can be highlighted as a truly good example of cooperation between counties and financial institutions. The following Hungarian and Croatian organisations are participating in the project:

1. Zala County Foundation for Enterprise Promotion – ZMVA (HU) 2. Entrepreneurs’ Centre of Somogy County Public Foundation – SMVKK (HU) 3. Baranya County Development Agency Non-profit Ltd. – BMFÜ (HU)






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4. HAMAG-BICRO (HR) 5. The public institution for the development of the Međimurje County – REDEA (CR) 6. PORA, the Koprivnica-Križevci County Regional development agency (CR) 7. VIDRA, the Virovitica-Podravina County Regional development agency (CR) 8. The public institution for the regional development of the Osijek-Baranja County (CR)

Each Light project should consist of at least one Light user on each side of the border. Each Light user should be registered or have an affiliate within the area defined by the programme. Light users should belong to the category of small and medium enterprises (SMEs). The minimal form of cooperation on the Light project is developing common technology, services or products resulting from bringing together Light users active on different sides of the border, with a view to establishing a new supply network and/or joint entry into new markets.

Light users are SMEs selected through open bidding. The maximum share in the total admissible cost that can be used from the B Light Grant Scheme is 75%, while the remainder of the amount is met by the Light users themselves. The grants range from 30 to 135 thousand EUR.

Regardless of subsidies from EU funds, there follow some examples of good practice of stimulating entrepreneurship. We shall present the Šibenik-Knin county small enterprise development programme, enterprise development subsidies in the Istra County, and measures for stimulating the development of the economy in the Zagreb County in 2017 (grants and subsidies for entrepreneurs).

With the aim of stimulating the development of small enterprise, the Šibenik-Knin County has adopted its Programme for awarding subsidies to business entities in 2018, under which, among other things, the costs of professional training for employees, purchasing long-term assets and marketing activities are subsidised. On the basis of an Open call for applications for subsidies for business entities in 2018, on the recommendation of the Committee, the county prefect has issued a decision granting subsidies worth a total of 396,500.00 HRK to 122 entrepreneurs; of which 54 were for co-financing marketing activities, 62 for purchasing long-term assets and 6 for professional training.

Furthermore, in April 2018, the Istra County has issued an Open call to award subsidies for stimulating enterprise development in the Istra County for 2018, for which 1,085,000.00 HRK were earmarked in the budget, through the following measures: 1. Starting business activities – self-employment; 2. Subsidising acquisition of new equipment; 3. Strengthening the competitiveness of the processing industry.

Finally, the Open call for applications to award grants to entrepreneurs for appearing in enterprise-related events in 2018, issued by the Zagreb County. Under the terms of this Call, enterprise-related events are fairs, expositions, competitions and similar events related to

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enterprise, organised in order to present entrepreneurs or entrepreneurs' associations, to promote or rate their products or services.

2.1.5 Support for entrepreneurial projects from the Operational Programme Competitiveness and Cohesion 2014-2020 (OPCC), financed from the European Regional Development Fund

Overview of activities in the operational programme and the projects within the framework of the Priority Axis 3, "Business competitiveness"

The Law on Establishing an Institutional Framework for Implementing European Structural and Investment Funds in the Republic of Croatia in the Financial Period 2014-2020 (OG 92/2014), together with the Ordinance on the Authorities in Management and Control Systems for the European Social Fund, the European Regional Development Fund and the Cohesion Fund, Related to the Objective "Investment for growth and jobs" and the accompanying amendments to the Ordinance (OG 107/2014, 23/2015, 15/2017, 18/2017), regulates the system for implementing the Operational Programme Competitiveness and Cohesion. The Law and the Ordinance define the institution performing the role of the Coordinating body for managing ESI funds, bodies performing the roles of Managing authorities for each Operational Programme, the Certifying authority and the Auditing authority and their functions and responsibilities. The Law allows the Managing authority to transfer part of their functions onto Intermediate bodies. The Ordinance defines two levels of Intermediate bodies, and determines their functions. In addition, the Ordinance names the institutions that function as Intermediate bodies in Management and control systems for the European Social Fund, the European Regional Development Fund and the Cohesion Fund. The Ministry of Regional Development and EU Funds (hereinafter: MRDEUF) is the managing authority for the Operational Programme Competitiveness and Cohesion. In addition to the MRDEUF as the managing authority (and a level 1 intermediate body for part of the investment priorities), there are five more level 1 intermediate bodies and four level 2 intermediate bodies participating in implementing the OPCC. Level 1 intermediate bodies, beside the MRDEUF, are: the Ministry of Science and Education; the Ministry of Economy, Entrepreneurship and Crafts; the Ministry of Construction and Spatial Planning; the Ministry of Environmental Protection and Energy; and the Ministry of Maritime Affairs, Transport and Infrastructure. Level 1 intermediate bodies are responsible for a number of tasks, some of the most important of which are: participating in drafting programme documents; managing risks at the level of the priority axes; securing project financing from public funds, drafting criteria for selecting projects and participation in the selection; drafting instructions for applicants; monitoring the progress of the projects in cooperation with level 2 intermediate bodies; and ensuring that funds irregularly spent by the user are recovered. In addition, these bodies also perform a number of other tasks cited in the aforementioned Ordinance.

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Level 2 intermediate bodies are: the Central Finance and Contracting Agency for European Union Programmes and Projects; the Government agency for SME development, innovation and investment; the Environmental Protection and Energy Efficiency Fund and Hrvatske Vode (the water management authority). Their main tasks as level 2 intermediate bodies are: risk management at the operational level; participating in compiling instructions for applicants, participating in the selection of projects; examining and approving requests for reimbursement of funds. In addition, these bodies also perform a number of other tasks listed in the aforementioned Ordinance. The OPCC Priority Axis 3 has the following implementation structure: Managing authority – the Ministry of Regional Development and EU Funds Level 1 intermediate body – the Ministry of Economy, Entrepreneurship and Crafts Level 2 intermediate body – HAMAG BICRO. Within Priority Axis 3 – business competitiveness, 970 million EUR have been secured from the European Regional Development Fund to support small and medium enterprises. The Priority Axis 3 comprises two Investment priorities and four specific objectives with the accompanying allocations. The Investment priority 3a, "Promoting entrepreneurship, in particular by facilitating the economic exploitation of new ideas and fostering the creation of new firms, including through business incubators", is focused on improving the overall business environment. It contains the following Specific objectives: • 3a1 "Better access to finance for small and medium enterprises" (allocation value – 250 million EUR), which seeks to improve access to public financial support for small and medium enterprises through establishing various forms of financing instruments,

• 3a2 "Enabling a favourable environment for business creation and development" (allocation value – 233 million EUR), whose objective it is to support the development of enterprise through provision of services by entrepreneurial support institutions.

The Investment priority 3d, "Supporting the capacity of small and medium sized enterprises to grow in regional, national and international markets and to engage in innovation processes" is focussed on direct support for small and medium enterprises, with the intention of increasing competitiveness. It contains the following Specific Objectives:

• 3d1 "Improved development and growth of SMEs in domestic and foreign markets" (value of allocation – 307 million EUR), which seeks to enable investment in strengthening competitiveness and optimising production processes,

• 3d2 "Improved innovativeness of small and medium enterprises" (value of allocation – 180 million EUR), which is focussed on increasing SMEs' innovativeness by providing support in introducing innovations into products, services and production processes.

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Table 6. Awarding procedures and the total value of the financing decisions (by 15 March 2018 in relation to the value of the Call by the Specific Objectives)

Specific objectiv

e Name of awarding procedure

Number of adopted

financing decisions

Value of the call/HRK

Total value of adopted financing

decisions, the state on 15

March 2018 /HRK

User's contribution (personal means)/HRK

3a1

Procedure of entrusting the tasks of implementing the financial instruments to HAMAG-BICRO

n/a 1,292,000,000.00 1,292,000,000.00 342,000,000.00

3a1

Procedure of entrusting the tasks of implementing the financial instrument to the CBRR

n/a 836,000,000.00 828,263,590.00 790,615,245.00

3a2 Developing business infrastructure 43 640,000,000.00 582,077,673.69 7,111,111.00

3a2

Developing a network of entrepreneurial support institutions (SI) through the Government agency for SME development, innovation and investment (HAMAG-BICRO) – pilot project

1 7,024,000.00 7,012,151.61 0.00

3a2 Developing commercial zone infrastructure

0 76,000,000.00 0.00 0.00

3a2 Promoting entrepreneurship 2017-2019

0 38,000,000.00 0.00 0.00

3a2

Providing high-quality services for SMEs through Entrepreneurial Support Institutions (SI)

0 22,800,000,00 0,00 402,352.94

3d1 Building SMEs' production capacities and investment in equipment

39 760,000,000.00 222,023,409.61 337,108,565.78

3d1 Investment in SMEs' technology of production

29 357,200,000.00 62,939,386.14 83,273,878.84

3d1

Improving SMEs' competitiveness and efficiency in areas with developmental specificities by means of information and communications technologies (ICT)

228 110,000,000.00 102,512,676.83 15,089,067.19

3d1

Support for the development of SMEs in tourism by increasing the quality of hotels and additional amenities

28 304,000,000.00 193,720,916.55 456,000,000.00

3d1 Competence and SME 191 1,342,000,000.00 848,218,431.73 2,013,000,000.00

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Specific objectiv

e Name of awarding procedure

Number of adopted

financing decisions

Value of the call/HRK

Total value of adopted financing

decisions, the state on 15

March 2018 /HRK

User's contribution (personal means)/HRK

development

3d1

E-impulse - Enhancing the business development and technological aptitude of SMEs

1,032 250,000,000.00 237,179,008.80 83,333,333.33

3d1 Internationalisation of SMEs' business 57 38,000,000.00 31,305,183.89 9,500,000.00

3d1

Reaching the market through product certification

54 38,000,000.00 13,767,928.28 9,500,000.00

3d1 Internationalisation of SMEs' business through business support organisations

0 38,000,000.00 0.00 0.00

3d2 Innovations by newly established SMEs 62 74,000,000.00 66,687,586.78 8,222,222.22

3d2 Commercialisation of innovation in enterprise 0 114,000,000.00 0.00 114,000,000.00

Source: OPCC annual implementation report, Quarterly OPCC implementation reports Overview of the use of OPCC Priority Axis 3, "Business competitiveness", funds in the Koprivnica-Križevci County

By May 2018, there were a total of 49 entrepreneurial projects in the Koprivnica-Križevci County that were co-financed with grants from Priority Axis 3, "Business competitiveness". These were investments whose admissible costs amounted to more than 123 million HRK, and the average co-financing rate was 85%. Only one of the 49 projects concerned public entrepreneurial infrastructure (the city of Koprivnica) – an incubator worth more than 13.4 million HRK, while the entirety of the remaining more than 110 million HRK was used by entrepreneurs themselves, primarily micro- and small ones.

Number of projects Total grants/HRK Total value of

investments/HRK Total contribution of the

user/HRK Total public

expenditure/HRK Total admissible expenditure/HR

K

49 72,888,507.35 147,328,241.61 50,477,607.76 74,080,019.12 123,366,115.11

As far as using OPCC financial instrument is concerned, in the same period, there were 52 users:

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Number of projects Gross amount (total value of loan/guarantee etc.) Net amount (value of state subsidy)

52 in total: 50 (through HAMAG BICRO), 2 (through the CBRR) 26,892,439.17 2,027,024.14

Source: www.strukturnifondovi.hr

2.1.6 Concluding SWOT analysis

The Koprivnica-Križevci County Development Strategy 2014-2020, adopted in late 2016, gives a clear overview of the strengths, weaknesses, opportunities and threats concerning the further development of enterprise in KKC.

SWOT analysis11

Strengths Weaknesses - developed small and medium enterprise - growing number of small companies and their growing share in overall revenues - SMEs champions of new employment - developed entrepreneurial infrastructure - stabile and continuous credit financing of entrepreneurs with subsidised interest rates - good availability of spaces in entrepreneurial areas for new investment - continuous co-financing of utilities infrastructure in entrepreneurial areas - tradition of agricultural production for the needs of the food industry - good potential for the development of cultural tourism, rural and wellness tourism and various forms of inland tourism

- insufficient connectedness of small and medium enterprises both amongst themselves and with large business entities - insufficient focus of small and medium enterprises on technological development and commercial innovation, as well as marketing activities - a lack of technological infrastructure for the development of small and medium enterprise - inadequate implementation of EU standards and norms for the operation of small and medium enterprises - falling number of active sole proprietorships and the number of those employed in sole proprietorships - underutilisation of capacities in agriculture

Opportunities Threats - strengthening competitiveness and growth of export-oriented entrepreneurs - strengthening the investment environment by improving the public promotion of the County economy and attracting local and foreign investment - linking up business entities (clusters) - strengthening the initiative to connect small business entities with medium and large entities

- poor demographic outlook (ageing population and diminishing workforce), as well as human flight of expert and highly-educated workers into larger economic centres leads to a growing lack of adequate workforce

11 https://kckzz.hr/wp-content/uploads/2017/03/Županijska-razvojna-strategija-za-razdoblje-2014.-2020..pdf

http://www.strukturnifondovi.hr/

https://kckzz.hr/wp-content/uploads/2017/03/%C5%BDupanijska-razvojna-strategija-za-razdoblje-2014.-2020..pdf

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- strengthening entrepreneurial and technological infrastructure

Projects financed by European Union funds impact on the daily life of Croatian citizens, and are extremely important both to the Republic of Croatia as a whole, and specifically to the KKC. These are large infrastructural projects in the field of transport and environmental protection; projects that support the construction of the institutional and legislative foundations of the RC; projects to build civil society, which foster democratisation and raising awareness of human rights; cross-border cooperation projects encouraging partnership and cooperation between regions and neighbouring countries; and projects related to regional development.

Considering the outlined weaknesses of KKC economy, further investment is needed in the overall entrepreneurial and technological infrastructure, after the model of other successful investments carried out throughout the entire Republic of Croatia.

In spite of the relatively low level of nominal interest rates, capital costs are still high for many enterprises in Croatia. This is due to the fact that Croatian enterprises face overindebtedness, low profitability, insufficient security instruments (collaterals) and a need for much larger working capital than the average in European Union countries. This situation impedes their access to capital and hinders their ability to carry out investments although there are investment opportunities in the market. The enterprises' high level of indebtedness likewise leads to delays in payments and prevents many enterprises from using banking services. One of the reasons for the difficulties in external financing of the SME sector lies in the instability of business operation caused by the long-term inability to collect outstanding debts, on which Croatia has continuously lagged behind the EU average (in Croatia this always takes between 55 and 60 days, while in the EU, the collection period is around 45-49 days.12 Therefore, it is not surprising to hear that the total operating losses due to the inability to collect outstanding debts in the RC are still twice the size of the EU average.13 There is a high level of uncertainty in Croatia as regards the economic outlook and financial situation of enterprises, which negatively impacts on trust in the economy, and consequently also on the availability of financing, especially for SMEs, due to banks' aversion to risk. Due to the high proportion of fixed assets in total assets, the fixed assets gap, which represents the need for investment in fixed assets, is negative. That is to say, an enterprise's fixed assets are largely antiquated, so there is a need to invest in productive assets in order to increase the firm's competitiveness.

12 https://ec.europa.eu/eurostat 13 http://www.hgk.hr/

https://ec.europa.eu/eurostat

http://www.hgk.hr/

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The investment needs that need to be met at short notice (the financing gap) amount to between 308 million and 542 million EUR,14 including investment in long-term and short-term assets. Due to the poor financial state of SMEs, investment needs may be met through loans or grants. On the other hand, SMEs are faced with insufficient funds to finance their own participation, necessary to realise loans and implement the planned investments. Public funds, that is, open tenders to award grants and subsidised financial instruments therefore make it significantly easier to realise investments. Without the aforementioned subsidies, a significant number of SMEs would not be able to realise their planned investments. Since grants from public sources still play a key role in facilitating access to funds for financing small and medium enterprise investments that generate growth and job creation, they remain the most potent tool for enterprise growth, both in the Koprivnica-Križevci County and throughout the Republic of Croatia.

14 According to FINA and CEPOR data.

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3. Regional Action Plan

3.1 Introduction to the measures contained in the Action Plan

This chapter describes the Action Plan measures aimed at improving systematic support for SMEs and their micro-financing in the Koprivnica-Križevci County, with the prospect of extending them to other counties by using the institutional solutions available in the set-up of the Croatian County Union. In designing this Action Plan's implementation measures, it was taken into account that from 2000 to 2012, Croatia has successfully implemented national programmes to stimulate the development of SMEs, in line with EU experiences and good practice; programmes within which a large share of the operational implementation of measures fell under the purview of counties and development agencies. Since 2013, the programmes have been adapted to the conditions and rules pertaining to using EU funds, while from 2016, the system of supporting SMEs has been based on the Operational programme competitiveness and cohesion 2014-2020 (OPCC), funded by the European Regional Development Fund. Until 2014, grants and loan programmes for low cost financing for SMEs under RC Government programmes were financed through the state budget. Counties, including Koprivnica-Križevci, and cities took part as organisers and stakeholders, and likewise implemented similar incentive measures to suit the needs and capacities of their regional and local economies. In other words, national programmes to stimulate entrepreneurship were continuously implemented, ensuring adequate regional coverage. Moreover, the national programmes have supported the development of entrepreneurial support infrastructure, which provided a programme of incentives for local- and regional-level entrepreneurship. Koprivnica-Križevci County, as well as local self-government units within the County, have actively worked on creating a positive entrepreneurial environment and, within their competences, supported the development of small and medium enterprises through entrepreneurship development support institutions (later in text:SI) including:

− PORA Regional development agency of Koprivnica Križevci County15 − Croatian Chamber of Economy, the Koprivnica County Chamber − Croatian Chamber of Trades and Crafts of Koprivnica-Križevci County, with its

system of sole proprietors' associations: Koprivnica chamber of trades, Križevci chamber of trades and Đurđevac chamber of trades

− Koprivnički poduzetnik d.o.o. [Koprivnica entrepreneur ltd.] − Križevački poduzetnički centar d.o.o. [Križevci entrepreneurial centre ltd.]

15 Active as a coordinator in designing county development strategies, for instance the Koprivnica-Križevci County human potentials development strategy 2014-2020 and the County development strategy of Koprivnica-Križevci County 2013-2020. It is engaged in the drafting of the 2030 National Development Strategy.

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However, from 2016, incentives for SMEs in the spheres of competitiveness, improved financing, entrepreneurship education and entrepreneurial support infrastructure have been wholly financed through European Union funds, and no national programmes of systematic stimulation of SMEs. The macroeconomic entrepreneurial environment has displayed an inadequate level of economic growth, limited size of the domestic market, a high level of dependence on the tourism industry (especially in the coastal region), unbalanced regional development, insufficient coordination among mid-level institutions and the local and regional self-government, and an insufficient private sector share in the GNP. As Croatia no longer pays out subsidies to SMEs from its budget, and micro- and small entrepreneurs cannot use the available EU funds due to public tender conditions, especially the financial threshold and the amounts required to submit project proposals, the necessity of forcefully activating regional initiatives becomes evident. Micro-entities are especially important to employment, as they account for one third of overall employment in Croatia, are larger than the EU average and employ an average of 4.8 workers, compared to the EU average of 3.9, with the largest share accounted for by the food processing industry, six percentage points above the EU average. Although the basic indicators for small and medium enterprises in Croatia are equal or better than EU averages, certain areas display a need for further strengthening – areas such as financing, resolving administrative obstacles and legal security, entrepreneurial second chances and family entrepreneurship, and, especially, life-long entrepreneurial learning (by acquiring skills, management know-how) and applying innovation and research and development in doing business, as well as developing cooperative enterprise. The policy of stimulating the development of entrepreneurship is still in the incipient stages of development, it is uncoordinated; stimulus programmes and measures are either not being implemented or there is a gap in incentive measures for special forms of enterprise and entrepreneurial networking (cooperative, social, cultural and creative, agricultural enterprise, clusters), for novice entrepreneurs as well as a number of social groups that can become entrepreneurs, those intending to, or who have already become entrepreneurs:

− unemployed young people, − unemployed older people, − women entrepreneurs, − entrepreneurs with an entrepreneurial project who have not founded a business entity

(pre-startup), − students preparing to embark on entrepreneurship, − young people with vocational degrees, − employed people wishing to become entrepreneurs, − people who are in a disadvantaged position in the labour market, − existing micro-entrepreneurs, people whose employment contracts were cancelled due

to an initiated insolvency proceeding, − unemployed people not on the records of a competent institution,

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− entrepreneurs facing difficulties of a kind other than insolvency, who have a high-risk status as they are not recognised seekers of funds to start or develop a business,

− entrepreneurs-to-be, that is, those who are independently (outside the support system of the Croatian employment service, which has carried out ESF measures for self-employment by founding a business entity) establishing a business entity,

− self-employment, and − people in a disadvantaged social position, national minorities (ethnic entrepreneurship)

and people with disabilities.

3.2 Action Plan

This action plan is inspired by the examples of good practices of all project partners, but also on the additional elaboration or revision of ongoing activities of the KKC, on the international experience acquired through this project, and on opinions of other project partners. Nevertheless, the measures proposed reflect on the regional specificities of the KKC as well as the specific needs of SMEs in Croatia and do not represent the direct application of a measure already available in some of the other regions. In addition to the mesures based on the practices presented by the partner institutions, we are presenting few additional new measures whose direct beneficiaries are not entrepreneurs (although they are the final beneficiaries) but instead they target the business support institutions themselves. Namely, in Croatia there is a recognized need to further strengthen the capacities, coordination and cooperation within the existing network of business support institutions. Through their cooperation it would be possible to create additional synergies and increase the relevance, efficiency, effectiveness, coherence and sustainabilty of concrete financial and advisory services offered to the entrepreneurs. The Action Plan contains 10 implementation measures:

1. Measure 1 – County programme of loans for micro- and small entrepreneurs, with subsidised interest payments and guarantees

2. Measure 2 – Establishing a County expert body and coordination for SMEs 3. Measure 3 – Monitoring and researching institutional solutions for micro-financing 4. Measure 4 – Monitoring and researching alternative sources of micro-financing and

new forms of micro-entrepreneurship 5. Measure 5 – County programme of support for micro- and small entrepreneurs 6. Measure 6 – Strengthening capacities of entrepreneurial support institutions 7. Measure 7 – Family entrepreneurship in Koprivnica-Križevci County and financial

instruments for business transfers 8. Measure 8 – Podravina-Prigorje smart office 9. Measure 9 – Furthering and informing SMEs 10. Measure 10 – Continuing the activities of PORA's cooperation on incentive measures,

programmes and financing sources at the national level

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The measures are described in five points:

1. Previous experiences and practice 2. Description of measure 3. Stakeholders 4. Time-frame 5. Necessary funds

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Measure 1 County programme of loans for micro- and small entrepreneurs with subsidised interest

payments and guarantees A 1.1. Previous experiences and practice National loan programmes to improve SME financing have been implemented in the periods from 2001-2004, 2004-2014 and from 2014 until today. PORA has become actively involved in coordination, organisation and operational implementation, along with the competent County body and the regional chamber system according to certain credit lending models. Easier access to external financing also applies to loan guarantee programmes of the Croatian Agency for SMEs, Innovations and Investments (HAMAG BICRO). The practice of implementing such programmes in Croatia has shown that small, and especially micro-entrepreneurs in Croatia are mostly focused on traditional forms of external financing, that is, bank credits. The implementation models for improved SME financing in the aforementioned periods are described as follows: a. by pooling the funds of the ministry in charge of SMEs and local and regional self-administration units, the deposit model allows local self-government to participate in the national loans programme and creation of a joint lending potential in commercial banks by increasing their deposits through a credit multiplier. b. the guarantee deposit model allows local and regional self-government units to participate in the national loans programme for SMEs and create lending potential in commercial banks by increasing their deposits through a credit multiplier, where the deposit simultaneously functions as a guarantee fund, and c. the subsidised interest payments model is carried out by the ministry in charge of SMEs, along with local and regional self-government units, implementing the national small business financing programme on a contract basis, where commercial banks use their own funds to create a credit fund from which credits for enterprise loans are funded. The funds allocated by the competent ministry, as well as own funds planned and disbursed from the national and county budgets, are used by the County to subsidise interest payments on enterprise loans. The interest subsidies on enterprise loans constitute state subsidies. Credit and interest subsidy users are registered in the Central small enterprise information system (Središnji informacijski sustav malog gospodarstva – SSIMG), handled by the ministry in charge of SMEs. Part of this system is implemented through a distributed technological model, that is, it contains a distinct programme subsystem for enterprise loans to which counties, including Koprivnica-Križevci County through the relevant administrative bodies, are connected so as to allow them to enter data on users of loans and interest subsidies in their territories; monitor the operational implementation of loans programmes and planning the necessary funding for disbursement of interest subsidies; and draft reports for the Finance Ministry's Central register of state subsidies.

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Small business entities, especially micro-entities and novice entrepreneurs have highlighted the following issues relating to external financing:

− difficulties with a lack of credit guarantees, − inadequate range of banking products and services − complex demands by banks and necessary loan documentation − improper, that is, high interest rates and − insufficient information on the available financial products.

The availability of various types of sources of financing for starting, growing and developing entrepreneurial activities in Croatia is highly limited. Although securing easier access to finances is one of the chief goals of the National entrepreneurship development strategy 2013-2020, analyses have shown a low level of diversity of sources of SME financing, reduced funds for financing novice entrepreneurs, poor analytical tools for monitoring business lending, a lack of initial capital to enable easier financing of projects that have no adequate security instruments, no existing project financing and schemes regulating grants and micro-financing, and an undeveloped micro-credit system and institutions. The inadequate provision of micro-financing makes it difficult for small enterprises to obtain loans worth from 10,000 to 100,000 HRK. Initial capital and financing young people and micro-entities through banks are constrained by security instruments and other conditions that such entrepreneurs have difficulties fulfilling. The existence of loan guarantees has not significantly diminished the need for security instruments, as banks are still very cautious with regard to risk, while interest rates are significantly above those of the European Common Market.

Good practice as inspiration Key issues - Social Business Women

Microloan (KIZ SINNOVA) - OSTPOL-MICROLOAN

(OFFENBACH, Germany)

- the social outreach of microfinance and mitigating the negative effects of financial exclusion, such as launch of the initiatives intended for entrepreneurs, both new and existing, that have problems with classic financing in commercial banks

A 1.2. Description of the measure The programme implements measures of low-cost financing of SME entities through micro-crediting with guarantees at County level. Micro-crediting at low interest rates and guarantees should allow financing current business activities of micro- and small business entities in Koprivnica-Križevci County, with the aim of improving their business and payment capacity. The main aim of the Programme is to expand the sources and forms of financing SMEs through regional incentive measures due to the gap in systematic solutions for financing micro- and small entrepreneurs. In order to implement this Programme, it is necessary to establish a special County micro-credit fund, which would gather public funds from the County and local self-government (cities and municipalities in Koprivnica-Križevci County) budgets. The pooled funds are to be

37

placed in a deposit account at a commercial bank, and comprise a guarantee fund, subsidy fund and financial deposit that is increased by a credit multiplier (the overall credit fund is formed by being increased by the agreed credit multiplier). This new model of county-level micro-crediting SMEs with guarantees and interest subsidies in the deposit contains a transferable financial mechanism – it is possible to divert funds within a single micro-credit fund according to users and purposes of a loan (multi-user account) with the option of revolving (continuous lending by linking the fund to incoming loan repayments). The model was constructed on the basis of a 10 million HRK example, but can be applied to any other amount, as well as different commercial bank multipliers.

Financing model and working collaboration between the Koprivnica-Križevci County and a commercial bank

RATE OF PARTICIPATION

the KKC and the local self-administration (1/6) BANK (5/6) Interest rate for the end-user = 2%

The legal grounding for the Programme is provided by articles 6 and 10 of the Law on stimulating the development of small enterprises (Official Gazette, no. 29/02, 63/07, 53/12, 56/13 and 121/16) and the Entrepreneurship Development Strategy 2013-2020, strategic objective 2, Improved access to financing, which determines the development of various financial options for small business entities and the removal of the financial gap for the SME sector. Description of the main characteristics of the programme A. Loan users

Users of micro-crediting with guarantees are micro-entities in the SME sector, freelancers, cooperatives, social enterprises, users of CES self-employment measures and family agricultural holdings (FAH), regardless of the registered commercial activity, whose total annual income does not exceed 750,000.00 HRK over two years prior to submitting a loan and guarantee request. Entities that have been active for up to two years can become loan users. An user may not have a registered debt in unpaid public levies officially registered by the Tax Administration in excess of 15,000.00 HRK 3 months prior to the month in

Commercial bank Multiplier = x 6

Bank risk fund = 40 mil. HRK

Deposit in a single bank worth 10,000,000 HRK

(MODEL) Guarantee fund = 8 mil. HRK

Interest subsidy fund = 2 mil. HRK

Total loan fund = 48 mil. kn Potential of a minimum of 480 loans

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which the loan request is submitted. The user may use a loan that is smaller than the maximum amount determined in this Programme, but overall, the loan may not exceed 100,000.00 HRK, or 70% of the guarantees, per entity.

B. Loan conditions Loan purpose

A loan may be used for the following purposes:

- financing current liquidity and permanent working capital and

- purchase of movables. A loan cannot be used to refinance or settle bank loans.

Size of loan From 10,000.00 to 100,000.00 HRK Nominal interest rate Up to a maximum of 3% Loan processing costs Up to a maximum of 0.5% Loan repayment deadline Permanent working capital up to 4 years

Movables up to 5 years Loan utilisation deadline Up to 6 months Level of guarantee − the highest guarantee percentage amounts to 70%

of the loan principal − the lowest guarantee percentage amounts to 10% of

the loan principal The annual fee for issuing a guarantee is up to 1%

Security instruments − personal guarantees by the owner of the micro-entity, bonds, promissory notes, deposits and other instruments

The period of grace lasts for up to 6 months Loans may be approved for acquiring second hand movables to be used for business activities (cars, delivery vehicles, trailer vehicles, tractors, utility vehicles, tools, work equipment, mowers and other smaller machines, etc.).

C. Purposes, that is, activities, exempted from the regulations on state subsidies will not be granted credit.

A 1.3. Programme stakeholders In order to implement this Programme, Koprivnica-Križevci County concludes contracts with local self-government units and a commercial bank. The County is the organiser of the implementation of the Programme, it implements coordinating and operational tasks, while the regular tasks concerning budget financing are entrusted to the relevant administrative County/local self-government bodies. In addition, a county Micro-crediting commission is established, made up of representatives of the County, commercial bank, local self-government unit, and entrepreneurial supporting institutions. A 1.4. Time-frame The time needed to implement the Programme and its duration is determined pursuant to decisions made by the County and tied to the established loan repayment and interest subsidy deadlines, interest subsidies and duration of guarantees.

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A 1.5. Necessary funds To provide an overview of the model, the example of the pooled funds from the County and local self-govermnent unit budgets amounting to 10 million HRK was used. There are 3 cities and 22 municipalities in Koprivnica-Križevci County .

Measure 2 Establishing a County expert body and coordination for SMEs

A 2.1. Previous experiences and practice As part of its primary activities, the PORA – Regional Development Agency of the Koprivnica-Križevci County performs tasks of the regional coordinator. Pursuant to the Law amending the Republic of Croatia Regional Development Act (OG 123/17), PORA as the regional coordinator performs the following public tasks16: − drafts the County development strategy and other strategic and development documents

for the County, as well as the implementation documents for which the founder and/or co-founders authorise it,

− ascertains the conformity of county development strategic planning documents with higher-level strategic planning documents, and adopts decisions confirming conformity,

− provides professional assistance on drafting and implementing programs of support for public administration bodies and public institutions in its county founded by the Republic of Croatia or the county in preparing and implementing development projects in the interest of the development of the county, especially projects co-financed by EU structural and investment funds,

− provides professional assistance on drafting and implementing the development projects of the public administration bodies and public institutions in its county founded by the Republic of Croatia or units of local and regional self-government – projects in the interest of the development of the County, as well as joint development projects in the interest of the development of more than one county,

− implements county development programmes for which it is authorised by the founder and/or co-founders

− implements the Ministry's and other central state administration bodies' programmes that concern more even regional development,

− enters development projects significant to the County's development into the central electronic register of development projects,

− coordinates the entry of other public bodies in the central electronic register of development projects,

− monitors and observes the status of the projects of all the users in the county in the central electronic register of development projects,

16 http://pora.com.hr/

http://pora.com.hr/

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− performs professional and advisory tasks related to the implementation of the County development strategy and other strategic, development and implementation documents for the County, and report to the founders and the Ministry on their implementation,

− cooperates with the Ministry and all other relevant stakeholders on tasks related to strategic planning and managing development in the County,

− harmonises the operation of local self-government units in the County related to regional development,

− performs administrative and professional tasks necessary to the County partnership, and − participates in the work of partnership councils. The Koprivnica County chamber of the CCE is engaged, among other things, with representing the interests of the business sector, through the activities of the Business council, vocational associations and the Businesswomen's club ALFA; it represents and protects the interests of businesspeople in the County, participates in task forces and committees of the Koprivnica-Križevci County, provides services in the field of enhancing the functioning and business activities of firms, regularly organises educational activities, seminars, workshops, round-tables and various professional events concerning current economic issues, conducts business counselling for entrepreneurs, provides expert assistance and consulting regarding starting a business, financing entrepreneurial projects, obtaining grants and incentives, taxes, implementing laws, provisions and norms on doing business, EU issues etc. It also has Information services (it has at its disposal and handles databases on companies, at both the county and the national levels) and conducts macroeconomic analyses monitoring the state of the economy of the Koprivnica-Križevci County.

The CCE implements the project named the Digital chamber. This is a new information-communication platform for the CCE's e-services, available to members and the business community, as well as the public administration and citizens, with which the CCE seeks to contribute to increased use of information and communication technologies in the field of provision of e-services throughout Croatia. Thus, the project, that is, the implementation of seven e-services will speed up communication and improve relations with member institutions, the publication of documents for public competences will be digitised, and it will allow entrepreneurs to become even more active in participating in creating and changing the legislative and regulatory framework. In addition, the Digital chamber will make potential sources of financing more accessible to its members, and will allow Croatian entrepreneurs to better promote their products and services. The first functionality initiated within the framework of the Digital chamber project is the Business network web portal, which gathers in one place all information essential to entrepreneurs, such as:

− macroeconomic indicators at both the Croatian and individual county levels – GNP, average monthly net salary, registered unemployment rate, export of goods and foreign direct investment

− separate indicators for RC for real growth-rates, inflation, average mean exchange rates for EUR and USD, number of active business entities and gross foreign debt

− general information about Croatia and its economy, and

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− browsable database of business entities – on which basic data and current financial indicators and business activity analyses are available; business entities may be searched by name, persons responsible or statistics of activities, and can be compared to other entities with the same BAC (business activity classification).

Information available at https://digitalnakomora.hr/hr/enterprise. Among other activities, the Croatian Chamber of trades and crafts – the KKC Chamber of trades and crafts is involved in providing services, promotional activities for products and services, organising fairs, exhibitions and business contacts; it fosters development and research as well as innovation, represents its members' interests in defining economic policies in local and regional self-government units, monitors and analyses economic policy and its effects on the development of sole proprietorships and small enterprise, collects data for the Chamber's IT system, provides expert assistance in establishing and conducting the business activities of sole proprietors' and proprietorships associations, and manages the registry of sole proprietors' associations. The Koprivnica entrepreneuri ltd is engaged in informing and counselling, education, designing plans and studies, programmes of subsidies, development projects. It also exchanges all current information in cooperation with partner and support institutions, state bodies, agencies, non-governmental organisations, the academic community, potential investors and others. The Koprivnica entrepreneurial centre performs the above-mentioned activities, in addition to managing a development centre and technology park. Many analyses of SMEs and international evaluations of Croatia's competitiveness (Global Entrepreneurship Monitor (GEM) project), framed by the elements comprising the surroundings of an entrepreneurial ecosystem, have highlighted the lack of cooperation and simultaneity of action using the principle of open coordination among the stakeholders in the system comprising multiple levels, as well as the necessity to harmonise public strategies, programmes, instruments and policies at all levels. Without this, many problems due to which a significant number of elements comprising the entrepreneurial environment function as barriers rather than support to citizens' entrepreneurial intentions and entrepreneurs' activities, cannot be solved, which is especially relevant to the regional level in Croatia.

Good practice as inspiration Key issues

- Autonomous region of Sardinia (COOPFIN cooperative)

- OSTPOL MICROLOAN (OFFENBACH, Germany)

- cooperation between entrepreneurial supporting institutions, entrepreneurs or those who want to become one and local, regional and national authorities – good communication and cooperation enables the implementation of the activities focused on the facilitation of the access to microfinance

- combination of financial support and development of soft skills (presentation, communication, networking, etc.)

- administrative and regulatroy support provided A 2.2. Description of measure Establishing an Expert group and coordination for Koprivnica-Križevci County SMEs should be the beginning of improved coordination among all stakeholders involved in support for

https://digitalnakomora.hr/hr/enterprise

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SMEs, in order to improve the conditions for completing projects from the EU 2014-2020 financial perspective, prepare activities in the KKC connected to the Republic of Croatia's EU presidency and entering a new EU financial perspective from 2020 onwards, in which the strategic goals of the National development strategy 2030 and activities on its implementation are especially important. Therefore, the open questions of inadequate sources of data and information on SMEs, as well as the scope of the necessary information, including poor analytics for monitoring SME credit financing, are gaining relevance. The activities should include building an analytical and statistical system for SMEs in the KKC, as, similar to the national level, it is lacking in necessary data and information, fragmented and is not publicly available, and linking statistical databases on entities' business activities, ownership, import/export activities, adding indicators on innovativeness, investment and similar. Without this it will not be possible to provide comparative information for designing measures and instruments for regional public policies under the conditions of EU financing, nor will it be possible to allow business entities comparative measuring and evaluating against the others (grouping, the best). Otherwise, at the regional level, the availability of statistical and comparative information on SMEs is highly incomplete and temporally out of step, which makes it significantly more difficult to manage regional development. The basic tasks of the Expert task force and county coordination for SMEs are:

− coordinating activities/measures and departmental policies/programmes connected to this Action Plan, and sources of information on SMEs, Action Plan stakeholders and other official sources

− initiating activities on creating a statistical underpinning for SMEs in the KKC, by linking sources of information, systematically addressing statistical monitoring of entrepreneurial activities, especially rural social groups, those in a disadvantaged social position, women and women's and young people's enterprise, as well as developing statistical and other indicators

− conducting analyses of needs for education and training in the field of grants and other forms of financing, financial, digital and media literacy and financing special forms of enterprise and cooperative enterprise

− coordinating activities with the education system with the aim of introducing broader informal and formal programmes for acquiring entrepreneurial capabilities and self-employment, as well as know-how on initiating business endeavours for young people, programmes of education and training specific to managing associated business entities, development of educational and advisory programmes for managing family enterprises, with a special emphasis on the problems of generational transfers and transferring management and ownership, as well as the development of new models of education, training and professional development of women for managerial positions in ICT businesses, new technologies, creative industries, innovation application etc.

− organising a structure and partnerships for providing education and training services for all stakeholders

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A 2.3. Stakeholders The coordination should reflect a quad-helix concept and, alongside county administration bodies and PORA, encompass entrepreneurial support institutions, the Croatian Centre for Cooperative Entrepreneurship, the chamber system, the Croatian Employers' Association (HUP), the Croatian Information Technology Association, representatives of associations (citizens), LAGs and higher education institutions. A 2.4. Time-frame The County expert body and coordination for SMEs should be established for a period of 4 years, lasting from 2019 to 2023. A 2.5. Necessary funds The necessary funds and financing sources for Measure 2 can be established on the basis of a more detailed elaboration of the activities necessary to fulfill the tasks of this Body, both within the framework of its activities and through project financing.

Measure 3 Monitoring and researching institutional solutions for micro-financing

A 3.1. Previous experiences and practice Micro-crediting at the national level is implemented by:

− The Croatian Bank for Reconstruction and Development (CBRD) has implemented a lending programme designated for financing micro-entrepreneurs. The programme was implemented in cooperation with the European Investment Fund (EIF) and the EU, with the aim of stimulating self-employment, modernisation and expansion of existing businesses. EU-supported micro-crediting was a Programme intended for micro-entrepreneurs, legal and natural persons employing up to 10 employees and generating an annual business income of up to 2 million EUR. The value of the largest loans corresponded to 25 thousand EUR expressed in HRK, and the funds could be used to invest in fixed assets and permanent working capital. The repayment deadline was up to 5 years including a grace period of up to a year. Lending was conducted through commercial banks that signed cooperation contracts with the CBRD to carry out this programme.

− The Croatian Agency for SMEs, Innovations and Investments has conducted a programme called "Micro-crediting – the first step towards entrepreneurship", based on the national programmes of subsidies for 2013 and 2014. The advantages in comparison to commercial loans lay in the ability to access credit with a promissory note as the sole security instrument, while a one-off fee of 0.25% of the value of the approved loan was the only expense, and the interest was set at 0.99 percent. Since 2016, it has carried out an European Structural and Investment Funds (ESIF) programme of micro- and small loans sourced from EU funds (ERDF, based on OPCC)

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− Commercial banks − The ministry in charge of enterprises and sole proprietorships has implemented a

lending programme called "Loans for success 2014". Under Measure 2, loans can be used to finance current liquidity or permanent working capital, valued between 30,000 and 200,000 HRK, while funds for interest subsidy are provided by the Ministry, amounting to 5 percentage points. Counties do not participate in this Measure. The entire lending Programme consisting of 2 Measures (in Measure 1, investment loans valued up to 5 million HRK are approved, with interest rate subsidies according to the model c. as described under Activity 1 of this Action Plan). The programme is implemented either until the funds are expended or for 4 years, that is, by the end of 2018. It can be predicted from he available information that over the following period, the ministry in charge of SMEs will not conduct any similar lending programmes to improve SME financing.

SMEs are poorly informed with regard to CBRD lending programmes, especially low-costs leasing. In order to provide comprehensive support to small and medium enterprises, the CBRD has established business cooperation with leasing companies, based on framework loans approved to leasing companies to finance small and medium enterprises by means of financial leasing. This way the CBRD, in cooperation with leasing companies, wishes to provide entrepreneurs with a more simple procedure for acquiring needed movables, at more favourable terms. The acceptable objects of leasing are: equipment, machines, commercial vehicles and vessels. Funds issued within this financing Programme can be used by small and medium enterprises, pursuant to the criteria defined in the Law on stimulating the development of small enterprise, by FAHs and other legal and natural persons independently performing business activities. The CBRD has carried out this Programme through leasing companies. Documented requests for financing are submitted to leasing companies that entered into cooperation contracts with the CBRD to carry out the Programme.

A comparison of micro-financing models in Croatia with the best international practice points to the underdevelopment of micro-financing in contrast to the developed financial markets in which a broad range of such institutions operates. The micro-credit market is also undeveloped, although micro-financing has been used since 1996, in war-struck areas. Three micro-financing institutions were established: NOA (Osijek), DEMOS (Karlovac) and MIKROPLUS (Zagreb). Only one of the three (NOA) has survived, and today operates as a credit union. The EU network of micro-financing institutions holds no data on such institutions in Croatia (link: https://www.european-microfinance.org/members/list). Globally, micro-financing services are performed by credit unions, which do business in more than 100 countries, providing various financial services, primarily lending and deposit management.





- combination of financial support and development of soft

https://www.european-microfinance.org/members/list

45

skills (presentation, communication, networking, etc.) - administrative and regulatroy support provided

A 3.2. Description of measure A sufficient number of implementable entrepreneurial projects needs to be secured in order to access micro-credit potential. Owners of micro- and small entities do not have the sufficient experience in successfully negotiating investments by outside investors. Compared to best international practice, the main problems with micro-financing in Croatia lie in the highly restrictive regulatory framework, inadequate guarantee programmes/schemes, a range of financial products on offer whose purposes are not suited to SMEs, and users' uninformedness about financial products. All this would suggest that activities/measures need to work in the following directions: a) programming special incentives for micro-enterprises and special forms of enterprise, with guarantees b) strengthening cooperation between local and regional self-government units with state-level bodies, in which the LRSGUs ought to have at their disposal reliable information on the entrepreneurial projects and needs of micro-entrepreneurs in their territories c) considering forms of joint cooperation, that is, linking up county credit programmes in order to increase the overall lending potential and extend the purposes and users, such as micro-entities and special forms of enterprises, as well as sole proprietorships d) increase activities on providing information, in cooperation with other local and regional self-administration units. The activities should involve planning an examination of the real state of affairs in institutions engaged in micro-financing in the KKC, establishing cooperation with, and seeking solutions among regional branches of commercial banks, as well institutional carriers of EU micro-financing, as follows.

I. Credit unions – initiate business collaboration and finding solutions for changing regional legislation according to the bottom-up model

In Croatia, the share of credit unions in the capital market is insignificant in comparison to other actors – a mere 0.1% based on the criterion of assets and relative shares of financial intermediaries. However, credit unions play a very important and specific role, as they provide financial services to micro-entrepreneurial entities, and self-employed and unemployed persons with limited access to funding. For these specific groups, access to funding often represents a high obstacle to carrying out an entrepreneurial endeavour, and approval or non-approval of a loan in the amount of, for example, 20,000 HRK may mean a new job being created or, on the other hand, closing down a business entity. The Credit Unions Act of 2011 has replaced savings and credit cooperatives with credit unions. The Credit Unions Act also introduced numerous restrictions, the most important of which is that they can only operate within a single county, which has reduced their potential markets, thus endangering the efficiency of their business activity (credit unions cannot

46

operate payment processing, savings are not insured with the National Bank). Despite efforts and formal requests by the Croatian Association of Credit Unions, the legislation has still not been amended.

II. Ethical bank – establish various forms of cooperation that may serve as an example for regional initiatives based on the principles of an ethical bank – they serve the communities where they do business

An Ethical bank (link: https://zef.hr/o-nama/eticna-banka) is in the process of being established, and will serve both legal and natural entities. All projects that receive positive marks on the criteria of financial sustainability, ecology and social effects in the course of their evaluation may submit requests for financing. The basis of the investment policy of an ethical bank is represented by projects concerning:

− agriculture, especially eco-friendly, − renewable energy sources, − small and medium firms focused on manufacture, processing and professional

services, − informatisation and new technologies − social entrepreneurship − novice entrepreneurs.

The Ethical bank will be registered and organised as a joint-stock company whose sole shareholder will be the Ethical financing cooperative (Zadruga za etično financiranje - ZEF). The bank will be wholly owned by its clients, who will have an equal vote in the assembly regardless of the level of funds invested in it. The ZEF currently has more than a thousand members. Globally, ethical banking is not new – in the European Union alone there are already 15 countries where there are ethical banks. An ethical bank is based on the established principles of ethical banking, the key ones among them: 1. Threefold approach in the heart of its business model Ethical banks are guided by a threefold approach in evaluating projects. A project must equally satisfy the criterium of social benefit, environmental and financial sustainability. 2. Focussing on the community, serving the real economy Ethical banks serve the communities where they do business. Their goal is to return to the roots of banking, where banks are focussed on knowing their local communities. 3. Individual relationships with clients and direct understanding of their economic activities and the risks involved Ethical banks establish strong relations with their clients and are directly involved in understanding and analysing their economic activities. 4. Long-term thinking and self-sustainability Ethical banks base their strategies on long-term thinking in order to guarantee the robustness of their operation, thus making them more resilient to external impacts. The Ethical bank is

https://zef.hr/o-nama/eticna-banka

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facing difficulties related to authorisation by the Croatian National Bank: https://www.hnb.hr/-/hnb-banka-bez-kapitala-ne-moze-dobiti-odobrenje-za-rad. III. Commercial banks – research which banks operating within the KKC approve micro-

loans, and under which conditions, and which groups of entrepreneurs they cover Banks offer various types of loans for SME financing: export financing loans, working capital loans, investment loans, construction loans, loans to tourism service providers, mortgage loans, loans for specific (green) businesses (developing olive farming, viniculture and viticulture), loans financing solar systems for the production of electrical and thermal energy, loans for novice entrepreneurs, loans for suppliers, loans for women entrepreneurs etc. In addition to the financial products listed above, the majority of commercial banks also have additional lines of financing, based on business collaboration contracts with ministries, the CBRD, HAMAG BICRO, local self-government units, cities, counties and international financial institutions (EBRD – the European Bank for Reconstruction and Development, EIB – the European Investment Bank, CEB – the Council of Europe Development Bank, EFSE – the European Fund for Southeast Europe, EIF – the European Investment Fund and others). IV. EU financial instruments – the possibility of entering should be analysed in order to

utilise micro-financing funds As an EU-level financial instrument, the EU programme for employment and social innovation (Employment and Social Innovation – EaSI, https://ec.europa.eu/social/main.jsp?catId=1081) is implemented in order to promote and guarantee sustainable employment and high-quality and sustainable social protection in the campaign against social exclusion and poverty, and improve working conditions. The EaSI fund is managed directly by the European Commission, while its financial structure comprises EU programmes that had been conducted independently from 2007 to 2013 (PROGRESS, EURES and Progress Microfinance). Since 2014, these 3 programmes have constituted the 3 axes of EaSI financing, supporting:

• Modernising employment and social policies in the framework of the PROGRESS axis programme (61% of the overall budget),

• Labour mobility from the EURES axis (18% of the overall budget) and • Access to micro-financing and social enterprise within the framework of the

Microfinance and Social Entrepreneurship axis (21% of the overall budget). The overall budget for the period 2014-2020 is 919,469,000 EUR. Information is available at http://www.poslovni.hr/eu-fondovi/veliki-europski-planovi-za-poticanje-mikropoduzetnistva-303692 (Croatian only). The European Commission does not directly finance entrepreneurs and social enterprises, but allows chosen micro-credit institutions and investors in social enterprises to increase the amounts loaned (link: microcredit providers). This link cites ERSTE bank as the Croatian micro-financing intermediary. Public and private bodies established at the national or regional level, which provide loans for natural persons, micro-enterprises and/or financing social

https://www.hnb.hr/-/hnb-banka-bez-kapitala-ne-moze-dobiti-odobrenje-za-rad

https://ec.europa.eu/social/main.jsp?catId=1081

http://ec.europa.eu/social/main.jsp?catId=987&langId=en

https://ec.europa.eu/eures/






http://www.poslovni.hr/eu-fondovi/veliki-europski-planovi-za-poticanje-mikropoduzetnistva-303692

http://www.poslovni.hr/eu-fondovi/veliki-europski-planovi-za-poticanje-mikropoduzetnistva-303692


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enterprises, can apply for funds. Link: https://ec.europa.eu/social/main.jsp?catId=1084&langId=en#navItem-4. A 3.3. Stakeholders PORA, entrepreneurial support institutions in the County, the Ethical Bank, the Croatian Association of Credit Union and credit unions in the County and in north-western Croatia, commercial banks and the Croatian Banking Association, the Enterprise Europe Network, the ministry in charge of social entrepreneurship, the Croatian Centre for Cooperative Entrepreneurship, the academia, clusters and associations of social entrepreneurs. A 3.4. Time-frame This Measure needs to be implemented for at least a medium-term period of 5 years. A 3.5. Necessary funds The measure is financed from the stakeholders' regular activities.

Measure 4 Monitoring and researching alternative sources of micro-financing and new forms of

micro-entrepreneurship A 4.1. Previous experiences and practice Crowdfunding has changed the finance industry on several levels. First, it has allowed an entrepreneurial idea to be evaluated before the end-product reaches the market. Second, it has allowed access to capital without additional collateral demanded by the traditional financial sector (a bank will not issue loans for setting up an enterprise without taking a mortgage over real estate and/or machinery). Third, it disperses risk. With a well-formulated business plan, the initiator of the crowdfunding campaign knows how much money is needed to start a business, and if the necessary money is not collected, will not embark on a business endeavour. On the other hand, donors pay in relatively small amounts that they can afford to forfeit. And finally, the marketing dimension, which is key to a successful campaign. Crowdfunding does not only collect money for business activities, but also creates publicity.

A crowdfunding project in Croatia is being run through the Croinvest.eu platform (link: http://croinvest.eu/zasto-odabrati-crowdfunding-platformu-croinvest-eu/). All platform users have the right to free counselling on the possibilities of financing their own projects through EU funds. To date, crowdfunding was used to marshal nearly 30 million HRK in total. Campaigns were mainly related to the creative and arts industries, such as film, music and writing, and more than half (44) of the campaigns were initiated in Zagreb. The majority still prefer the Indiegogo platform (https://www.indiegogo.com/), though lately, the Funderbeam (https://www.funderbeam.com/) platform, unveiled by the Zagreb Stock Exchange (http://zse.hr/default.aspx?id=74619) has also been used. Collaborative economy connects supply and demand for time, services and property based on the principles of collaboration, solidarity and reciprocity. It is also interesting due to the

https://ec.europa.eu/social/main.jsp?catId=1084&langId=en#navItem-4

http://croinvest.eu/zasto-odabrati-crowdfunding-platformu-croinvest-eu/

https://www.indiegogo.com/

https://www.funderbeam.com/

http://zse.hr/default.aspx?id=74619

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fact that it is based on free market economy. It does not require starting from scratch, or economic accommodation and reforms, but only what is possible and feasible in any given situation. It advocates the freedom of individuals who will satisfy their needs through the market, by means of supply and demand mechanisms. It relies on the creative entrepreneurial spirit of individuals and leaves it to users themselves to create the substance of the service, while using the latest technology, which is available to nearly all. It creates new forms of demand, new forms of economy that did not exist before. In so far, this is not a matter of the transformation of the existing, but of something entirely new. Collaborative economy is a sign of the time in which the ideal conditions for a new and different way of thinking about property have emerged. Time banks are a system of supply and demand for work, that is, services, where the means of payment is not money, but time, which is the only currency. Time banks (or time exchanges) have taken root in more than 30 countries around the world. They easily fit in with the collaborative economy: talents, knowledge and skills are reciprocally shared in the community. For instance, a timebank member "earns" an hour of time by doing shopping and delivery for an elderly person. They can then "spend" that hour by paying for an hour of childcare. Each person has value and everybody can give something to the community. There is an expressed principle of reciprocity (one good turn deserves another). Sharing time creates deeper interpersonal relations in society and valuable, ennobling experiences. Trust and the fine social structure of the community are rebuilt, especially where the state has failed with its social programmes. The first Time banks appeared in the eighties in the USA, in response to a market economy in which an entire range of human activities was undervalued or entirely devalued, and where human solidarity and togetherness were being lost. Time banks are today spread across 26 countries over 6 continents. In Europe, these are Great Britain, Italy, Portugal and Spain.





- combination of financial support and development of soft skills (presentation, communication, networking, etc.)

- administrative and regulatroy support provided A 4.2. Description of measure In order to monitor the situation in the KKC, cooperation needs to be established with carriers and/or platforms/projects that cover the area, and a regular system of monitoring in the County and EU guidelines. There follow several examples.

a. Crowdfunding4Culture is a project organisation financed by the European Commission in order to "conduct in-depth research into the effects of crowdfunding", in which, as the EC highlights, thousands of people across the EU have already taken part, and through which various cultural and creative projects have been successfully financed and realised.

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The aim is to find out what kinds of projects can receive support this way, which online crowdfunding platforms is it worth using and which should be avoided, what is necessary for a successful campaign and for a matching funds option, that is, for European institutions to provide additional funds to projects that have already amassed a certain sum of money through the Internet and crowdfunding. Crowdfunding4Culture wants to become the leading EU portal for all crowdfunding options, a kind of information node to serve both those in need of funding for their ideas and those who want to financially support them. The creative industries sector generates 4.2 percent of the European Union's GDP and employs 7 million people, the European Commission has emphasised, but it has faced cuts in public funding and insufficient financing. There are already 600 different platforms in the EU, which have gathered millions of Euros for various crowdfunding projects.

b. Direct financial services, organising accommodation services between natural persons, organising transport services between natural persons, on-demand household services and on-demand intellectual services represent five of the strongest European sectors of the collaborative economy (https://www.pwc.hr/hr/publikacije/press-room/2016/pwc-hrvatska-ekonomija-dijeljenja-20160704.pdf). The European Commission has seriously taken into consideration the positive and negative consequences of the new economic model, which is considered to offer new opportunities and provide consumers with greater choice, lower prices, increase economic, social and environmental values, creates a large number of new work and jobs, but also has a detrimental impact on the existing market, creates tensions between the existing suppliers of products and services, creates insecurity as it does not accept regulatory frameworks such as legalisation – registering, consumer protection, paying taxes, social security and permanent employment. Despite this, the EC17 is planning to invest 24 billion EUR to include entrepreneurs in the new circular economy (http://hrturizam.hr/sharing-economy-postaje-new-economy/).

c. A time bank is a special form of appraising volunteer work, where instead of money Bank members invest time, which they exchange. Everyone wishing to become a member brings with them a certain amount of personal free time and knowledge that they are willing to give to the community, in return for which they can get an equal amount of someone else's time or assistance performed. For example, you can invest your time in aiding elderly or infirm people, provide tuition, perform repairs and small household chores, take part in citizens' initiatives and similar. There is full equality among members

17 The EU Parliament "Considers that, in the sharing economy, the development of new business models, innovative services and temporary use of assets should be encouraged, but based, where possible, on similar rules for similar services, with a view to safeguarding the high quality of services, independently of how their access and provision is organised and to ensuring a level playing field and consumer safety while avoiding fragmentation that would hamper the development of new business models; believes that only a single-market approach can be taken with regard to the sharing economy, as fragmentation of the single market through local or national rules prevents European companies in the sharing economy from scaling up at European level; http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P8-TA-2016-0237&format=XML&language=EN

https://www.crowdfunding4culture.eu/

http://ec.europa.eu/culture/news/2016/0601-crowdfunding-cultural-creative-sector_en.htm

https://www.pwc.hr/hr/publikacije/press-room/2016/pwc-hrvatska-ekonomija-dijeljenja-20160704.pdf

https://www.pwc.hr/hr/publikacije/press-room/2016/pwc-hrvatska-ekonomija-dijeljenja-20160704.pdf

http://hrturizam.hr/sharing-economy-postaje-new-economy/

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of a bank, meaning that a professor's, office worker's, retired person's, common labourer's or student's time is worth the same as any other's. On the whole, you can invest anything you know and can do that would be of use to others. Time and human kindness become an exchangeable value, the meaning of the moment and of a common human gesture of goodwill are discovered. There are several time banks in Croatia (Pula, Rijeka, Zagreb…). The challenge to the development and expansion of this concept lies in the costs of organisation, which – although low – need to be covered if the system is to survive. Moreover, in smaller communities it is difficult to form a broad range of services that can be consumed through a time bank. Consequently, these systems sometimes become reduced to volunteer centres, which are praiseworthy ventures, but cannot encompass all that time banks do. Link: https://www.mojarijeka.hr/kolumne/ura-po-ura-prva-hrvatska-banka-vremena.

A 4.3. Stakeholders PORA, the County expert body and coordination for SMEs, ICT associations (for example http://www.startit.hr, https://www.cisex.org, http://www.hiz.hr/icttrain/hr/index.html), the Croatian Information Technology Association http://www.hiz.hr/english, clusters and communities of clusters with the CCE, Croatian Employers' Association's Information and Communication Technology Association, Croatian Centre for the Development of Volunteering (http://www.hcrv.hr/). A 4.4. Time-frame The measure needs to be activated within 2 years, followed by continuous monitoring. A 4.5. Necessary funds The measure is financed from the stakeholders' regular activities.

Measure 5 County programme of support for micro- and small entrepreneurs

A 5.1. Previous experiences and practice The regional dynamism of the entrepreneurial structure is equally based as that of the overall, that is, national structure on entrepreneurial endeavours that have their own individual life cycles, from the genesis of an entrepreneurial endeavour, through its growth, to maturity and termination. Securing their sustainability directly depends on economic stability, and the economic structure can be stimulated with an adequate level of intensity of initiation of business endeavours that are to replace those discontinuing business activities. The fact that the mortality of business endeavours is highest in the earliest stage of development (the first three years) should bring attention to the need to pay special attention to each stage of development of a business endeavour (from starting up, through "maturing" to growth and terminating business activities). In other words, strong entrepreneurial activity in initiating a business endeavour must be accompanied by a capacity of such businesses endeavours for

https://www.mojarijeka.hr/kolumne/ura-po-ura-prva-hrvatska-banka-vremena

https://www.mojarijeka.hr/kolumne/ura-po-ura-prva-hrvatska-banka-vremena

http://www.startit.hr/

https://www.cisex.org/

http://www.hiz.hr/icttrain/hr/index.html

http://www.hiz.hr/english

http://www.hcrv.hr/

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sustainability and growth, but also by appropriate action with regard to the reasons why the vitality of an economic structure would be endangered (business failures, difficulties in doing business, obstacles to terminating business activities etc.)

In implementing national stimulus measures for small business entities (trading companies, sole proprietorships and cooperatives other than those performing primary production of agricultural products and fishery), and pursuant to the Law on stimulating small enterprise development in the period 2003-2013, the ministry in charge of enterprises and sole proprietorship has implemented special projects/programmes for young people's and women's entrepreneurship, novice entrepreneurs, persons with disabilities, Croatian war veterans, social enterprises employing people with diminished work capacity or provide assistance to people in disadvantageous personal, economic, social or other circumstances and help include them in the wider social community, and whose users meet one or more of the following conditions: - they do not have sufficient funds to settle their basic needs, nor can they acquire such

funds with their work, income from assets or other sources - physically or mentally disabled, elderly, infirm or other persons who, due to permanent

changes in their health status, cannot satisfy their basic needs - other persons who are in distress due to disrupted family relations, addiction to alcohol,

drugs or other opiates, or other forms of socially unacceptable behaviour and other sources.

In 2013, the measures have covered small business entities employing or planning to employ persons with diminished work capacity, persons with disabilities, persons in disadvantageous personal, economic, social or other circumstances, and members of the Roma national minority, and include them in work processes. Applications under the national Programme were submitted by entities headquartered in all the counties of Croatia (regional focus of the national programme), and county development agencies and federations of cooperatives took part in its organisation and implementation.

Initiating ("swarming" in the GEM project) new business endeavours is an essential precondition for the vitality of an economic structure. New business endeavours bring new ideas, new technologies, new products, entry into new markets, and thus contribute to increasing productivity and competitiveness. Information on terminating business activities (ceasing work due to business failure, going into retirement, desire to initiate a new business endeavour, inheritance and other) is also important to the demographic dynamism of an economy. The GEM project monitors entrepreneurial activities through the initiation of a business endeavour and its development, and indicates the visible results of a process that begins considerably earlier than entrepreneurship, and is frequently ignored. This "invisible" part of the process of building individuals' entrepreneurial capacity includes education, experience, networking and interaction with the entrepreneurial ecosystem. From 2003 until 2012, the ministry in charge of enterprises and sole proprietorships has implemented special measures and programmes for target groups through its system of subsidies, while from 2013 until today, it has included these groups in horizontal questions in all public tenders, in line with EU rules, assigning them additional points (preferential scoring system). The ministry data show that at the Croatian level, in the period from 2008 to 2013, 15,261 requests for grants by target groups were received, and 5,448 subsidies were approved,

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a little over a third (35.7%). The number of requests and the number of approved grants indicate a great need among entrepreneurs in the target groups for grants, which however could not be approved wholesale because of budget restrictions. On the other hand, the majority of these are self-employed people and micro-entrepreneurs, who due to risk assessment in commercial banking were unable to access low-cost financing sources to develop their enterprises, as banks estimate that novices represent the highest risk as they do not have financial records and thus do not approve them loans, while the same happens to sole proprietorships because they operate as natural persons.

Good practice as inspiration Key issues - NLN Norway - Zala County Foundation for

Enterprise Promotion - OSTPOL MICROLOAN

(OFFENBACH, Germany)

- Well-targeted and easily accessible microfinance scheme for disadvantaged areas and for those entrepreneurs who cannot obtain regular commerical loans

- Business support services offered together with the financing instruments, to strengthen the financing effect and ensure sustainability of investments

- Support ot young entrepreneurs with viable business model through mentorin and training, serch for investors, access to business networks and obtaining valuable contacts (financial support + support services)

A 5.2. Description of measure A special Programme for micro- and small entrepreneurs is drafted at County level, intended for the target groups (cooperatives, social, cultural and creative, and agricultural enterprise), novice entrepreneurs, young unemployed people, older unemployed people, women entrepreneurs, entrepreneurs who have an entrepreneurial project but have not founded a business entity (pre-startup), students preparing to embark on entrepreneurship, young people with vocational degrees, employed people wishing to become entrepreneurs, people who are in a disadvantaged position in the labour market, existing micro-entrepreneurs, people whose employment contracts were cancelled due to an initiated insolvency proceeding and who are seeking a way out through self-employment, unemployed people who were removed from the records of a competent institution or never registered with it, and entrepreneurs facing difficulties of a kind other than insolvency, persons who are independently (outside the support system of the Croatian employment service, which has carried out ESF measures for self-employment by founding a business entity) establishing a business entity, self-employment and people in a disadvantaged social position, national minorities and entrepreneurs with disabilities. When programming the measures, the following activities may be taken into consideration in approving grants: 1. Facilitating the initiation of business activities and employment − assistance/mentorship in drafting a business plan, project documentation and a design

study for the revitalisation and/or adaptation of business premises for persons with disabilities

−

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− bookkeeping costs − costs of opening new jobs linked to the establishment − costs of establishing of businesses entities in childcare and care for the elderly − co-financing of costs of services of childcare and care for the elderly for unemployed

women and single mothers planning to become self-employed − costs tied to investments in non-material property – acquiring patents, authors' rights,

knowledge or other forms of intellectual property, licences, special knowledge and skills – know-how, or unpatented technical knowledge

− costs of establishing and co-financing investment in non-material property of a cooperative.

2. Assistance in creating market positions and strengthening competitiveness of newly

established business entities − costs of business promotion according to the choice of promotional mix − designing visuals and brand identities of newly established business entities, including

signs bearing an entity's name for the business premisses and calling cards − costs of organising conferences, expert conferences and gathering with the aim of

promoting successful examples of women's entrepreneurship − costs of professional training connected to investment. 3. Entrepreneurial education − the cost of education for entrepreneurial, sole-proprietorship, cooperative and cultural and

creative entrepreneurship and freelance activities. The Programme would be implemented following the "5+5", that is, "5+35" model, linking up sources of financing for micro- and small enterprise at County level. That is, grant beneficiaries who were approved grants of up to 5000 HRK in value are then allowed to apply for possible micro-crediting (described in Measure 1) in the amount of up to 5000 EUR (around 35000 HRK). For example: if 50 grants amounting to 250,000 HRK in total (if the upper limit of the value of the subsidy, or "5", is taken as the basis for the calculation) are approved, to aid the sustainability of their businesses the same beneficiaries can use the option of micro-crediting, which, calculated for the highest value of loans ("35") for the 50 of them, adds up to 1,750,000 HRK. A 5.3. Stakeholders PORA, County/cities'/municipalities' administrative bodies, the "5+35" Programme Implementation Committee, commercial bank. A 5.4. Time-frame The program of grants can be planned for a period of 2 years, while the county micro-crediting deadlines are defined in Measure 1.

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A 5.5. Necessary funds The example of the pooled funds from County and local self-government unit budgets was used for an overview of the model. The Koprivnica-Križevci County has 3 cities and 22 municipalities.

Measure 6 Strengthening capacities of entrepreneurial support institutions

A 6.1. Starting point and previous experience The professional infrastructure that provides services for those embarking on entrepreneurial activities and those wishing to develop an innovative business endeavour with a potential to grow must ensure a greater range and higher quality of services, especially those contributing to reducing business failures and those contributing to greater competitiveness and internationalisation. The number of institutions and satisfactory coverage of the territory of the county do not solve the problem of lacking good quality services for entrepreneurs. Over various stages of growth, SMEs need professional support from entrepreneurial support institutions (SI). It is usually considered that SI provide services that most SMEs cannot afford. Furthermore, different needs for specialised support for SMEs have been recognised in various regions of Croatia. However, it has turned out that SI do have sufficient capacities for providing high quality services and contemporary/modern approaches in solving SMEs' problems. SMEs' demands include relatively specific services, as well as relatively high-end services and other forms of business support. An additional problem lies in the status entrepreneurship has in the Croatian society, as well as a general lack of entrepreneurial skills. Although access to professional services is considered one of the most important functions of support institutions, such institutions also facilitate access to sources of financing, allow the transfer of knowledge and skills necessary for successfully starting entrepreneurial endeavours, provide information necessary for making important decisions regarding setting up an enterprise or planning its growth and development. It is precisely these services provided by support institutions that are the most important to entrepreneurs in the stage of starting an entrepreneurial endeavour (link: http://www.cepor.hr/HR_cijeli_rad_Oberman%20Peterka_Alpeza_Delic_2012.pdf).

It is necessary to secure additional support for entrepreneurial support institutions, which should be focussed on improving the quality of service provision, developing new services and balancing the availability of services to entrepreneurs in all counties. HAMAG BICRO has implemented a pilot-project called "Business Organisations Network Development" (BOND), worth 7,012,151.60 HRK, financed entirely by the European Regional Development Fund (link: https://hamagbicro.hr/mrezom-poduzetnickih-potpornih-institucija-do-rasta-poduzetnistva-u-cijeloj-hrvatskoj/). By means of thorough and specialised education of employees in entrepreneurial support institutions, the project aims to develop high-quality services that would be equally available to entrepreneurs in all regions of

http://www.cepor.hr/HR_cijeli_rad_Oberman%20Peterka_Alpeza_Delic_2012.pdf

https://hamagbicro.hr/mrezom-poduzetnickih-potpornih-institucija-do-rasta-poduzetnistva-u-cijeloj-hrvatskoj/

https://hamagbicro.hr/mrezom-poduzetnickih-potpornih-institucija-do-rasta-poduzetnistva-u-cijeloj-hrvatskoj/

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Croatia. One of the results of the project should be a Network of entrepreneurial support institutions, as a platform through which HAMAG BICRO will coordinate the development of SI competencies by means of a system of trainings. HAMAG BICRO has analysed the current situation, citing that more than 65% of SIs need to engage outside experts to assist their work, while 54% do so due to a lack of necessary expertise. For this reason, 34.21% of SIs have highlighted the strengthening of their staff's capacities through education, along with securing funding for the implementation of certain activities, as a factor necessary to increase the quality of the SIs' services, and ultimately to improve the entrepreneurial climate in Croatia. PORA has applied to take part in the aforementioned Project.

Good practice as inspiration Key issues - SODEBUR (PP3 – CEEI

Burgos) - Autonomous region of

Sardinia (COOPFIN cooperative)

- cooperation between entrepreneurial supporting institutions, entrepreneurs and national/local governments

- administrative and regulatroy support

A 6.2. Description of measure In this Action Plan, activities to strengthen capacities of SIs and improve coordination between, and management of, different strategic fields and objectives of the Koprivnica-Križevci County, will be implemented in four directions: 1. enhancing the strategic-management and coordinating structure with adequate human

resources and capacity for comprehensive and integrated management of developmental processes in the County

2. improving the management of projects (co-)financed with EU grants, and developing continuous support in the field of preparing and using EU funds

3. strengthening activities to attract investors to the KKC and improve coordination with those carrying out activities of stimulating investment at all levels

4. developing higher-level services (quality management, marketing plans, investment and project assessment, support for intellectual property rights, support for developing clusters and products, innovation); developing services contributing to a reduction in business failures (spotting opportunities, competence, financial literacy), to increasing competitiveness and internationalisation (design, higher financial and digital/media literacy, strengthening management, competitive intelligence) and to SME dynamism (financing, entrepreneurial education, second chances, family entrepreneurship, early signs of business troubles etc.).

The aim is to provide adequate products and services to SME subjects, depending on their position in the growth cycle, with an emphasis on developing capacities for providing support to entrepreneurs so that they can enhance their managerial capacities for strategic business planing and innovation. Implementing these activities encompasses developing employees' capacities, as well as employing more people in order to satisfy the needs of SMEs in the County.

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Strengthening capacities and recruiting implies that it will be necessary to secure additional funds for the work of the development agency. The structure of the activities also has to be reconsidered, especially as regards working on EU projects (securing funds for pre-financing and implementing EU projects, potential inclusion in preparing and implementing EU projects of the existing County institutions, possibilities and volume of execution of development agency activities for the needs of administrative bodies and County institutions, possible rewards for employees for successful approval and implementation of projects co-financed with EU funds). A 6.3. Stakeholders. Koprivnica-Križevci County, county local self-government bodies, SI in the KKC. A 6.4. Time-frame The measure should be implemented up to 2023. A 6.5. Necessary funds The funds need to be planned with regard to the planning and realisation of SIs' income, by structure and by specific activities and needs of financing the implementation of each activity. In addition, non-financing (so-called soft subsidies) also need to be utilised, for instance, PORA's participation in projects such as the HAMAG BICRO project "Business Organisations Network Development".

Measure 7 Family entrepreneurship in Koprivnica-Križevci County and financial instruments for

business transfers A 7.1. Previous experiences and practice Business transfers, per the EU definition, imply the transferring of ownership of an enterprise to another person or enterprise, thus securing the continuity of the enterprise's existence and business activity. The initiation of the process of transferring business is most frequently tied to the founder's going into retirement, although retirement is only one possible reason. Other reasons are most frequently of a personal nature (early withdrawal from business activities, changing professions and interests), sudden developments (divorce, illness in the family, death), changes in the business environment that might demand significant changes in the manner of doing business that the current owner of the enterprise is unwilling to undertake (new products in the market, new and aggressive competitors etc.) or a desire to start a new business endeavour (serial entrepreneurs). Each year, around 450,000 enterprises with some 2 million employees undergo the process of business transfer, and only 30% of family enterprises survive the transfer of business to the next generation, 13% to the third generation, and a mere 3% survive over a longer period.

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Business transfers, in terms of transferring ownership over an enterprise, can be executed through transferring ownership to members of the family (inheriting), selling the enterprise to non-family members of the enterprise (members of the board or employees) or to persons or business entities outside the company, including takeovers or mergers with other enterprises.

CEPOR – SMEs and Entrepreneurship Policy Centre – has been actively engaged in business transfer issues since 2009, when it participated as a partner in organising conferences on the subject of family enterprises. Long-term monitoring of the development of family enterprise has indicated significant differences in the environment, significance and availability of research and specific policies aimed at family enterprises in developed countries in relation to Croatia. Due to an absence of an official definition and statistical monitoring of family enterprises in Croatia, it is impossible to give a reasoned account of the significance and size of the problems that might issue from the neglect of specific aspects of family enterprises. Although there is awareness of the significance of family enterprises, their possible influence in the Croatian economy is established exclusively on the assessments and projections of the situations in developed countries with long traditions of their development and monitoring. Business transfers are a critical stage in the development of not only family-run enterprises, but other small and medium enterprises as well. European Union documents that address the significance of the issue of transfers of small and medium enterprises point to the 450,000 enterprises with around 2 million employees in the European Union that undergo the process of transferring business each year, and the assessment that around 150,000 enterprises do not adequately approach the issue of transferring business, thus jeopardizing around 600,000 jobs. The Business Transfer Barometer research, conducted in the first half of 2015, has allowed the significance of this problem in Croatia to be identified. Research results have pointed to 16,590 enterprises employing around 179,000 people, whose owners should begin planning the process of transferring business, and more than 5,300 enterprises that are at risk, threatening around 57,000 jobs. The relevance of the problem of business transfers is additionally pronounced in Croatia due to the large number of transfers that will take place over the next 5 years in enterprises established during the 1990s.

Although there is no systematic statistical monitoring of the number of family enterprises in Croatia, it is estimated based on the data on the share of family enterprises in EU countries, which reach 60%, that 50% of the employed in Croatia work in family enterprises, that the majority of small and medium enterprises in Croatia are family-run, and are owned by the first generation of entrepreneurs, who also manage the enterprises. Selling the enterprise is the best option in case the owner wishes to secure certain funds for retirement, when there is no-one in the family who might be a good candidate to inherit the enterprise and the owner does not want either to retain ownership of the enterprise or to transfer its management to a professional manager. Selling an enterprise is full of challenges, both to the seller and to the buyer. Defining the value of an enterprise is an important question for both sides. Assessing the value of an enterprise is a complex process, and different methods can result in different estimates. Value assessments are based on a comprehensive evaluation of the enterprise, including evaluating the business idea, market, customer base, realised income and future profits. Even when tried and tested methods of assessment are used, methods that can result in an evaluation of the real value of an enterprise, the question

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always remains what constitutes the real value to the buyer and to the seller. The seller often believes that the enterprise is worth much more than the potential buyer would estimate. These differences may arise from the differences between the intentions of the persons or enterprises interested in buying an enterprise. For some, buying an enterprise is important in order to use its products, market, production capacities and specific know-how. Others may be interested in buying an enterprise as it would mean the realisation of their vision. The diverse intentions of potential buyers entail different outcomes to the enterprise and its employees. Knowing that the buyer intends to redirect the development of an enterprise in a direction different to the vision of the current owner may reduce the owner's willingness to sell up, regardless of the offered price (link: www.mingo.hr). A significant number of entrepreneurs expect support in the process of business transfer, mostly around the technical execution of the transfer (43%), assessing the value of the enterprise (42%) and reconciling the interests of the enterprise and of the family in deciding on the future of the enterprise. After withdrawing from managerial positions in the enterprise, 68% of owners plan to remain present in the enterprise, while as many as 70% count on income sources on top of their pensions (link: http://www.cepor.hr/).

Good practice as inspiration Key issues - Zala County Foundation for

Enterprise Promotion - Autonomous region of

Sardinia (COOPFIN cooperative)

- cooperation between entrepreneurial supporting institutions to target specific type of enterprises

A 7.2. Description of measure It is necessary to conduct activities of monitoring and researching the status of family entrepreneurship in the Koprivnica-Križevci County, and to examine models of financing business transfers with a view to improving SME dynamism. According to the "Business Transfer Barometer" for Croatia (published by CEPOR, November 2015), the causes of termination of business activities are the following (comparative analysis): Causes of ceasing business activity EU Northern America Croatia

Selling opportunity 3.32 8.28 0.83

The enterprise is not profitable 33.24 18.59 33.60

Problems with access to sources of financing

11.50 7.50 23.55

Another job or business opportunity 11.62 17.48 12.95

A pre-planned exit 5.18 2.20 1.44

Retirement 6.08 11.50 2.51

Personal reasons 23.83 26.54 17.87

Contingency situations 5.22 6.93 7.26 Source: Global Entrepreneurship Monitor, CEPOR – SMEs and Entrepreneurship Policy Centre, 2014

http://www.mingo.hr/

http://www.cepor.hr/

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According to the results of the GEM study, there is a significantly lower share of entrepreneurs in Croatia who had an opportunity to sell their enterprise (0.83%) in relation to the EU (3.32%) and Northern America (8.28%), which suggests a narrow scope of options for ceasing business activities for entrepreneurs in Croatia due to the underdevelopment of the supporting infrastructure for buying and selling small and medium enterprises in Croatia. In the European Union, there are 19 online platforms allowing the sellers and potential buyers of small and medium enterprises to connect, while in Croatia there are no such platforms.

The fact that Croatia has fewer pre-planned ways of exiting business activities relative to the EU (1.44% vs. 5.18%) additionally highlights the need for raising awareness among owners of small and medium enterprises regarding the problems in transferring ownership and management functions. The information that the problem of adequate financing of business endeavours is a significantly more common cause of terminations of business activities than in the EU is also important to those creating an efficient business environment. Table 2: Number and share of enterprises with owners aged 55 and more, by county*

County No. of enterprises with owners aged 55 or more

Total no. of enterprises in the county

Share of enterprises (55+) in the total no. of enterprises in the county

Total no. of employees in enterprises whose owners are 55+

Total number of employees in the county

Share of 55+ enterprises in the total no. of employees in the county

Total revenue of 55+ enterprises (HRK)

Total revenue of all enterprises by county

Share of 55+ enterprises in the total revenue county

Koprivnica-Križevci

213 747 28.5% 2,998 22,901 13.1% 1,613,555,644 9,221,000,000 17.5%

*Limited companies (ltd.) with a minimum of one employee and a realised revenue of a minimum of 100,000.00 HRK in 2013 were considered (source: FINA) The activity pertains to the implementation of the recommendations set out in the aforementioned County-level publication: − Recommendation 1: Initiate campaigns focussed on raising awareness among owners of

small and medium enterprises aged 55 or more on the complexity of the business transfer process and the importance of preparing for the process on time.

− Recommendation 2: Co-financing education and counselling services in the process of transferring business activities for owners of small and medium enterprises aged 55 or more, including drawing attention to possible alternative solutions for business transfers.

− Recommendation 3: Strengthening the quality and availability of advisory support for the process of transferring small and medium businesses using the TTT (train the trainers) model, workshops and transferring European best practice experiences.

− Recommendation 4: Adopting a definition and introducing monitoring of family enterprises in the County, and developing and co-financing programmes of support aimed at strengthening the capacities of family enterprises for successful generational transfers.

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− Recommendation 5: Promoting business takeovers as a possible model for initiating an individual's business activity, and creating financial instruments to facilitate buying (taking over) enterprises whose owners are withdrawing from business activities.

− Recommendation 6: Co-financing the development of a virtual market bringing together buyers and sellers of small and medium enterprises by means of public-private partnerships, based on European best practice in developing such platforms and their functioning.

In addition to this, the collection of data and information on the status of family proprietorships and FAHs in the KKC. Examples of financing business transfers in the "Business transfer barometer": − Country: Finland; Relevant authority: Finnvera – Finnish agency for SMEs

(www.finnvera.fi); Description of activities: Finnvera is a specialised agency that provides financial instruments to further the business activities of Finnish firms and stimulate exports and internationalisation of business activities. In case of business transfers, Finnvera provides direct financing or various modes of securing financing for acquisitions of enterprises. In cases of credit financing acquisitions of enterprises, the entrepreneur taking out a loan must own at least a 20% share, work full time in the enterprise that should be the basic source of the entrepreneur's income. The entrepreneur takes out the loan as a person, and the loan is worth up to 85,000 EUR.

− Country: Denmark; Relevant authority: VaestFonden (www.vf.dk) Description of activities: In 2000, VaestFonden (the Danish investment fund) launched a guarantee scheme called VestKaution, aimed at providing support to small and medium enterprises to get financing for growing their business. This guarantee scheme facilitates transferring business by issuing guarantees that cover paying for goodwill, financed by banks. This way, buyers can complete the financial package for the acquisition. The value of the guarantee may cover 2/3 of the bank loan (up to 336,000 EUR). Commercial banks are responsible for processing and approving requests for financing.

− Country: Belgium; Relevant authority: Fonds de participation / Participatiefonds (www.fonds.org); Description of activities: Fonds de participation / Participatiefonds is a public institution that provides loans aimed at financing part of the funds necessary to buy and take over enterprises (a minority, majority or the entire enterprise). Loans secured by the Fonds de participation / Participatiefonds allow obtaining bank credit as an additional source of financing the acquisition of an enterprise. This type of loan is intended for self-employed persons whose entrepreneurial endeavour is less than a year old. The maximum value of the loan is 125,000 EUR, at a more favourable interest than commercial rates. Processing and approving credit requests is handled by commercial banks that have entered into contracts with the Fonds de participation / Participatiefonds.

A 7.3. Stakeholders Koprivnica-Križevci County, county local self-government bodies, PORA, CEPOR

http://www.finnvera.fi/

http://www.vf.dk/

http://www.fonds.org/

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A 7.4. Time-frame The measure needs to be implemented within 2 years, after which the state of family entrepreneurship should be continuously monitored. A 7.5. Necessary funds A county-level Project/project financing can be planned for the implementation of the Measure based on the recommendations.

Measure 8 Podravina-Prigorje smart office

A 8.1. Previous experiences and practice The e-Croatia 2020 Strategy has encompassed the currently available and new public electronic services for business users. e-Services for business users are important for improving the efficiency and productivity of public services and access to information and markets. The Strategy states that Croatia has an exceptionally high share of business users of e-services, which amounted to 92.7% in 2014 (this was particularly aided by the fiscalisation process and e-delivery of JOPPD forms [Report on Income, Income Tax and Surtax as well as Contributions for Mandatory Insurances], as well as e-registering in the pension insurance system). Numerous services facilitating the process of electronically establishing companies have already been developed. A new founder of a limited liability company or simple limited liability company establishes the company with a visit to a single physical location, and the whole process is complete within 24 hours. Although one must appear in person to establish a company, numerous A2A services accelerate this process. In addition, the Invest.in Croatia website holds all the necessary information on investment projects, entrepreneurial zones and other data necessary to make an investment decision. Registering the beginning of operation and all changes in the business activity is done online. In the field of reform by means of digitalisation, there are two projects, that is, their activities contained in the Action Plan of the Strategy in the field of national information infrastructure in the realm of state administration, that are relevant to the KKC: Creation of a one-stop shop

1. Preparing standard functionalities and equipment (computers / printers / scanners / networks / applications) that should underpin the informatisation of the counties18

2. Prepare an informatisation plan (equipment and networks) for the counties 3. Informatisation of the counties

18 The strategy foresees a one-stop shop located in the state administration office in each of the counties. However, according to the most recent initiatives of state administration reform it is planned to abolish the state administration offices; their functions will be taken over by appropriate county bodies.

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4. Linking up with other institutions' IT systems (for instance, the CES, the Croatian Institute for Health Insurance, the Croatian Pension Insurance Institute, the Ministry of the Interior...) in order to enable electronic exchange of data

5. Drafting plans for setting up one-stop shops 6. Designing applications for e-service provision in one-stop shops 7. Equipping one-stop shops with user ICT equipment (computers, printers...) and

computer networks, and enabling a public e-administration access spot for computer-illiterate people

8. Designing IT solutions allowing electronic submission of requests where there are no e-services, thus facilitating citizens' and business entities' communication with public administration bodies

9. e-Learning programme for officials and users 10. Awareness raising and education of officials 11. Raising citizens' awareness.

Improving the effectiveness of the system of local and regional self-government units

1. Conducting an analysis and drafting guidelines related to the division of responsibilities among the different levels of self-government, and preparing functional specifications for the application

2. Developing a model of optimisation of the allocation of assignments among the LRSGU

3. Raising awareness related to the model of optimisation, and conducting education on the application

4. Designing an application to support the implementation of the optimisation model and enable monitoring the effectiveness of the system of units of local and regional self-government

5. Pilot project to put the application into service in chosen LRSG 6. e-Learning programme for officials and users 7. Raising citizens' awareness on new divisions of responsibilities

For several years now, so-called one-stop shops have been established to facilitate registering and operation of SME entities, as well as for citizens. Thus, for instance, a one-stop shop system was established in the framework of the project to put the land registry in order. It enabled users to electronically submit requests by means of the e-Citizens system, that is, download copies of cadastral survey plans, transcript/extract from a title deed, registered land certificate or an excerpt from the Land data database without visiting a cadastral office or a land registry office. When submitting a request, the user uses a credit card to pay for administrative fees and stamp duties (increased by the fee charged by the credit card company), which the system calculates automatically, and receives in their mailbox the official documents signed with an electronic signature with a QR code and a document authenticity verification code. An official document issued this way has the same legal validity as a paper document certified with an official's stamp and signature. A single request can be used to demand several official documents from several cadastral offices or land registry offices. The legally mandated administrative fee or stamp duty is charged for issuing

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the abovementioned official documents. If the submitter of the requests to issue official documents has legal grounds for waiving the administrative fees or stamp duty, the request for issuing official cadastral documents needs to be submitted at the relevant cadastral office. A request for issuing a registered land certificate is submitted at any land registry office. The official documents for which the requests are logged and processed in the one-stop shop (OSS) are delivered to the user's mailbox without the request being prepared and processed by civil servants, and without the costs of delivery and printing on paper. The cadastral requests and official documents prepared and issued this way incur no fees for use of data, pursuant to the Ordinance determining the real costs of use of data from the documentation of state land surveying and real estate cadastre (Official Gazette, no. 59/2018). In addition to facilitating access to data, the OSS also facilitates registering real estate in the land registry. Thus, attorneys and notaries public may use the OSS to electronically submit a proposal to register real estate on the grounds of a purchase contract or other document establishing the acquisition of property, paying the legally stipulated charges. The OSS can be accessed through the following links: http://oss.uredjenazemlja.hr and http://www.uredjenazemlja.hr/default.aspx?id=135. Where issues of ownership and building permits are concerned, various research sources have given Croatia poor marks in international benchmarking. This points to the following consideration: accessing the service described here requires appropriate IT apparatus and certain knowledge. These are accessible, and are described on the website, but it is a question whether, and to what extent, they are comprehensible to all, and whether there is sufficient awareness of this one-stop shop. Publicly available survey results show that a large number of citizens and business users of public e-services are satisfied with the way requests are processed through the Internet, but requests cannot be fully processed in their entirety in this way. There have been claims that it is therefore necessary to work more intensely on connecting IT systems and on complex e-services. The hitro.hr (www.hitro.hr), e-company (http://www.hitro.hr/Default.aspx?sec=72) and e-crafts (https://e-obrt.portor.hr/) services are available for establishing business entities online. In order to use these services, one needs to have an e-citizen card (https://pretinac.gov.hr/KorisnickiPretinac/eGradani.html). A look through web portals clearly shows that there is plenty of information available on using public e-services connected to founding SME entities and their operation, including those providing information at the EU common market level for all member states, such as https://europa.eu/youreurope/business/running-business/start-ups/starting-business/croatia/index_hr.htm and https://europa.eu/youreurope/business/running-business/start-ups/index_hr.htm

Good practice as inspiration Key issues - Fejér Enterprise Agency -

Combined Microcredit Scheme of the Economic Development Operational Programme (HU)

- „SME-friendly“ services, all relevant information and services in one place

- Integrated services – cooperation between dfferent pubic institutions to improve the regional competitiveness

http://oss.uredjenazemlja.hr/

http://www.uredjenazemlja.hr/default.aspx?id=135

http://www.hitro.hr/

http://www.hitro.hr/Default.aspx?sec=72

https://e-obrt.portor.hr/

https://pretinac.gov.hr/KorisnickiPretinac/eGradani.html

https://europa.eu/youreurope/business/running-business/start-ups/starting-business/croatia/index_hr.htm

https://europa.eu/youreurope/business/running-business/start-ups/starting-business/croatia/index_hr.htm

https://europa.eu/youreurope/business/running-business/start-ups/index_hr.htm

https://europa.eu/youreurope/business/running-business/start-ups/index_hr.htm

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A 8.2. Description of measure The activities/projects/reforms listed above can be specified through estimations of competitiveness and investment activities indicating SMEs' exposure to numerous obstacles and constraints that arise from the business environment and complicate the entrepreneurial ecosystem. From the viewpoint of an individual entrepreneur, especially one active in LRSGUs, this means losing orientation in the multi-layered system of public bodies and agencies whose administrative services they must use, in the shape of registering, permits, decisions, approvals and submittal of other requests in the course of doing business etc. Network services, web portals, e-services, online communication etc. will not improve the necessary entrepreneurial knowledge concerning the legal, financial, export, innovative, certification and other issues in doing business, especially within the framework of the EU market, nor will it improve other necessary knowledge (market legislation, public procurement, intellectual property, food safety, protection of competition and state subsidies, standards for industrial products, energy management systems, quality and risk management systems, business transfers, environmental protection, consumer protection, occupational safety and health, standards, registering and protection of names of authentic Croatian products etc.), but can only facilitate the processes of submitting requests as determined by the law. A Podravina-Prigorje smart office should be established by implementing the project that would encompass the consolidated and comprehensive knowledge needed by SMEs at county level, which would also be connected to national sources. The state of affairs is such that, along with using hardware and software equipment and databases/registries in the framework of the ICT surroundings (digital society, digital public administration, digital education etc.), as well as knowledge on using the programmes supporting direct communication with the public administration and downloading requested documents and monitoring published information, the entrepreneurs deciding on whether to establish an entity and those who are in operation have a critical need for knowledge about the system (what to request, and how and from whom – to whom to refer and from whom to obtain) and from the system (statutory rights and obligations, competences, what if). For example, the website for sole proprietorships, www.portor.hr, contains information on establishing a sole proprietorship and concerning the business activity of a sole proprietorship. In addition to e-crafts, sole proprietorships can also be established in county State administration offices, where experience has shown that the knowledge of the officials who can give advice in each specific segment of the process of registering and entry into the Register of crafts is of the greatest importance. The practice of entrepreneurial support institutions has shown a need to connect a number of sources, but also levels of information, which can be achieved by creating a single location (which does not have to be physical, but can also be virtual) – a smart office that collects information, uses the available knowledge and data and processes them, and provides comprehensive information/advises, by managing ICT resources and stored information. The

http://www.portor.hr/

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office also instructs users in the procedural knowledge it has at its disposal, and communicates with them in a manner that people find logical, natural, simple to use according to the principle of intelligent/smart solutions. A kind of expert system lies in the background of this project, that is, a system which gathers the experiences and knowledge that are already present in the entrepreneurial support institutions. In order to initiate a project, a pilot project study needs to be carried out to find out which information and advice the entrepreneurs in the County need. Project activities need to be organised so that the solution contains bottom-up models, that is, the smart office system needs to be set up so as to form vertical connections from the entrepreneur to the whole. This means that a smart office functions according to several models. One model can be recognised through a question about the system, for instance, "how to open a restaurant or a café". A smart office should provide advice and information on the documentation necessary to open a food service entity (company, sole proprietorship), the statutory regulation of their work, fiscal cash registers, menus, price lists for alcoholic and non-alcoholic beverages, equipment necessary for food service enterprises, the inventory of food service facilities, the importance of the appearance of the toilets in a food service facility and the processes of disinfection, disinsection and deratization. The second smart office model would be organised according to the field, recognisable for instance in the question, "how can I obtain a loan for working capital". In this case, it needs to have information at hand regarding sources of financing in commercial banking, EU sources etc. A smart office needs to have both a website (portal) and a free telephone info line. Moreover, a smart county office can operate according to rules that seek to avoid directing the seeker of advice and information to "go around in circles" in a system that they do not actually know and therefore will not be able to find and obtain the information (an indirect application of the "once-only" e-government principle). This means that the Smart office should be connected to numerous relevant bodies and agencies, as well as business entities in certain sectors, and that other operative issues, including rules of conduct, should be regulated. In addition, a smart regional office should operate according to the principle of openness and increase its volume of knowledge with each new case/question it solves. A 8.3. Stakeholders Koprivnica-Križevci County, county local self-government bodies, PORA and other SI, other stakeholders according to the determined project activities. A 8.4. Time-frame The measure should be implemented by 2023. A 8.5. Necessary funds A county-level Project or EU project financing may be planned for the implementation of the activities.

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Measure 9

Furthering and informing SMEs A 9.1. Previous experiences and practice It is known that SME development is essential to the development of regions and reduction of interregional inequality. Establishing new entities makes it possible to solve the problems of unemployment and depopulation. However, entrepreneurs have a low social status in Croatia, and attitudes towards self-employment are much more negative in Croatia than in other EU countries. Establishing an entrepreneurial entity is insufficiently recognised as an opportunity, but is rather viewed as a way to leave unemployment. Establishing entities out of necessity is also one of the reasons for their termination, which strongly impacts on the economic and entrepreneurial dynamism of the counties. An insufficient number of people in Croatia consider entrepreneurship to be positive or progressive. It is necessary to invest significant effort in elevating the status ascribed to entrepreneurs and increase the number of people who consider entrepreneurship a desirable lifestyle/choice of career, especially among the higher educated, in order to increase the rate of opening new enterprises and bring it into line with the EU rate. Croatia likewise has yet to attain the levels realised in the European Union with regard to the entrepreneurial activity of women and youth. There is currently an open call for tenders from the ministry in charge of entrepreneurship and sole proprietorships to further entrepreneurship in society through organising and implementing activities aimed at promoting successful business ventures and spreading and promoting success stories of SMEs financed by EU funds. The overall goal of the Open call is to promote entrepreneurship in the society in order to achieve positive change in attitudes towards entrepreneurship and allowing the emergence of a positive business environment as a basis for establishing, growth and development of SMEs. The specific aims of the Call are: − Increase in representation of entrepreneurship in the media − Increase in the proportion of entrepreneurs who became such thanks to favourable

circumstances for starting a business. Public bodies (ministries and agencies) can apply for the tender. The project can last up to 30 June 2019 at the latest. The total available amount of funds that can be granted within the framework of this Call is 38,000,000 HRK. The maximum project co-financing rate is 100% of the total admissible costs. Admissible activities that can be financed under this Call are the following: - activities aimed at promoting entrepreneurship through the media - activities aimed at promoting entrepreneurship through public events - activities connected to outside experts' services Activities of promoting entrepreneurship through the media and through organising public events include: - organising media campaigns - producing and promoting electronic media content - organising and implementing promotional, professional public events - organising and implementing contests and presenting awards

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- organising exhibitions Promoting entrepreneurship is a form of supporting the establishment of new entities, their growth and the strengthening of institutions providing support to entrepreneurs, with a view to contributing to more even and balanced regional development. In 2017, the ministry in charge of entrepreneurship and sole proprietorships has conducted an open call for granting sponsorship/co-financing from the State budget for organising happenings/scientific and professional meetings and national projects to promote entrepreneurship and other activities to promote entrepreneurship and sole proprietorship. The admissible users were: organisers of business events and happenings, fairs and other forms of promotion of small and medium enterprise and sole proprietorship; organisers of events intended to promote micro-, small and medium enterprise through nationally visible project activities promoting entrepreneurship and sole proprietorship (broadcast, print and digital media); organisers of business and innovation expos and similar forms of promotion, scientific and professional meetings and events showcasing local traditions, all of this related to promoting entrepreneurship, cooperatives and sole proprietorship, as well as to promoting traditional trades and crafts and local products. They had to be headquartered in the Republic of Croatia, and could be: 1. Educational, scientific research institutions and professional associations, municipalities,

cities, counties, the City of Zagreb, county development agencies, associations, cooperatives, federations of cooperatives, federations of associations, the Croatian Chamber of Economy and the Croatian Chamber of Trades and Crafts, regional chambers of trades and crafts and sole proprietors' associations, county chambers of economy, tourism boards of cities, municipalities and counties

2. Educational, scientific research institutions and professional associations, federations of cooperatives, the Croatian Chamber of Economy and the Croatian Chamber of Trades and Crafts, regional chambers of trades and crafts and sole proprietors' associations, county chambers of economy (for state-wide projects promoting entrepreneurship).

Users were allowed to join a consortium of bidders.

Good practice as inspiration Key issues - Székesfehérvár Credit

Scheme (FEA) - Credinfo Norway

(Microfinance Norway)

- advisory help such as different kinds of entrepreneurial trainings, mentoring and help with opening a start-up, as well as connecting through support groups

A 9.2. Description of measure As part of their annual programme activities, SIs have also conducted promotion activities through (i) informing, counselling and organising education and workshops for entrepreneurs from all groups/sectors, and (ii) promoting entrepreneurship in the Koprivnica-Križevci County by organising and co-organising fairs and happenings, and devising collective appearances of entrepreneurs in local, regional, national and international fairs (link:

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http://pora.com.hr/regionalni-razvoj/ostale-aktivnosti-regionalni-razvoj/12712-program-rada-i-financijski-plan). These activities should be continued. The following promotional activities are possible with regard to the scope of this Action Plan: PROMOTING SELF-EMPLOYMENT - promoting self-employment of vulnerable and hard-to-employ groups - promoting sustainable self-employment - promoting occupations in short supply PROMOTING VULNERABLE GROUPS' ENTREPRENEURSHIP - promoting the entrepreneurship of vulnerable groups such as women, the young, war

veterans, members of national minorities, persons with disabilities, retired persons etc. PROMOTING ENTREPRENEURIAL SUCCESSES - promoting success stories and good practice from the world of entrepreneurship - promoting entrepreneurial initiatives and projects - promoting entrepreneurial events - promoting measures for entrepreneurs - promoting county and national, as well as EU policies aimed at entrepreneurship PROMOTING LIFELONG AND ENTREPRENEURIAL LEARNING - promoting trades - promoting vocational training - promoting learning for entrepreneurship - promoting the inclusion of learning for entrepreneurship in schools, colleges etc. PROMOTING OTHER FORMS OF ENTREPRENEURSHIP - promoting social entrepreneurship - promoting agricultural entrepreneurship - promoting innovative entrepreneurship and social innovation - promoting export-oriented entrepreneurship - promoting creative and cultural entrepreneurship - promoting traditional and artistic trades and similar PROMOTING ENTREPRENEURIAL ASSOCIATION - promoting entrepreneurial associations, such as pupils' and students' enterprises and

similar - promoting trades guilds - promoting cooperatives and entrepreneurial clusters PROMOTING THE COUNTY ENTREPRENEURSHIP - organisation of fairs - organisation of promotive events which highlight successful examples of entrepreneurship

(e.g. by utilising EU funds – the Days of EU Funds, Business Take Off and others) A 9.3. Stakeholders Koprivnica-Križevci County, county local self-government bodies, SIs, other stakeholders according to the determined promotion activities.

http://pora.com.hr/regionalni-razvoj/ostale-aktivnosti-regionalni-razvoj/12712-program-rada-i-financijski-plan

http://pora.com.hr/regionalni-razvoj/ostale-aktivnosti-regionalni-razvoj/12712-program-rada-i-financijski-plan

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A 9.4. Time-frame The measure should be implemented by 2023. A 9.5. Necessary funds Funds from PORA's incomes are planned for implementation of the measure, while a county-level Project/project financing or EU financing may also be planned, as well as using the activities to improve the visibility of current EU projects.

Measure 10 Continuing the activities of SIs' cooperation on incentive measures, programmes and

financing sources at the national level A 10.1. Previous experiences and practice In its annual report for 2017, PORA has given an overview of its activities by programme:

I. Strategic planning, regional and rural development and stimulating entrepreneurship II. Programme of strengthening the absorption capacities for using EU funds.

In 2017, PORA has − submitted an application to the open call of the Ministry of Regional Development and

EU Funds (MRDEUF) for co-financing projects through the Sustainable development of the local community project. It has provided expert and technical assistance in drafting projects for several municipalities within the KKC. In all, 13 projects were approved, worth 4.258 million HRK.

− it has provided the service of implementing 8 entrepreneurial projects whose total value was 3,001,000 HRK, co-financed under the Operational Programme Competitiveness and Cohesion 2014-2020 (OPCC) and the Rural Development Programme 2014-2020 (RDP), and implemented projects under the Operational Programme Efficient Human Resources 2014-2020 (OPEHR)

− signed an Agreement with the MRDEUF on cooperation on drafting the "National development strategy until 2030" and implementing programmes preparing local development projects admissible for ESI fund financing, for which the relevant ministry has secured financing

− conducted continuous informing of entrepreneurs about all open calls for tenders for the national programmes and EU funds through the website, print media, by telephone and orally. Counselling services were used by 81 entrepreneur, while the website registered 65,221 views.

It also directed its activities in line with the incentive programmes in force that are financed from EU funds (ERDF, ESIF and ESF) – the Operational Programme Competitiveness and Cohesion, the Operational Programme Efficient Human Resources and the Rural Development Programme. According to the published data on the utilisation of EU funds by county, the state in the KKC on 31 August 2018 was as follows:

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OPCC - Operational Programme Competitiveness and Cohesion 2014-2020

Territorial unit Number of projects Cumulative contracts – grants (HRK)

Contracts – grants (EUR)

Share in the total value of projects on the level of RC

Koprivnica-Križevci 79 1,460,228,679 192,135,352 4.51%

OPEHR – Operational Programme Efficient Human Resources 2014-2020

Koprivnica-Križevci 27 55,206,906 7,264,067 1.21%

RDP – Rural Development Programme 2014-2020

Koprivnica-Križevci 10,711 357,271,886.65 47,009,458,77 3.92% Source: https://razvoj.gov.hr/UserDocsImages/Istaknute%20teme/Iskori%C5%A1tenost%20EU%20fondova%20po%20%C5%BEupanijama_2018.pdf Given the amendments to the Act on Regional Development of 2017, PORA as the regional coordinator will not provide direct support to individual employers; instead, it assumes the coordinating and promotional role and secures a strategic framework for harmonised action of other SIs whose activities are dedicated to direct support to entrepreneurs.

Good practice as inspiration Key issues - Sustainability and efficiency of microfinance

programs (Ministry for National Economy, Germany)

- SODEBUR (PP3 – CEEI Burgos) - Autonomous region of Sardinia (COOPFIN

cooperative)

- cooperation between entrepreneurial supporting institutions, entrepreneurs and national/local governments

A 10.2. Description of measure a. A revision of the OPCC and OPEHR will be carried out in line with the available

information. For this reason, it is necessary to increase information-sharing among the institutions and gather information on the changes, and increase coordination at the level of the KKC.

b. Continuing monitoring with coordination for HAMAG BICRO micro-crediting programmes. 2 micro-crediting programmes have been initiated to date, based on the OPCC ESIF micro- and small loans and the RDP micro- and small loans for rural development.

c. It is planned under the OPEHR to establish a fund for micro-financing of social entrepreneurship, to be implemented by HAMAG BICRO. Here it is also necessary to keep track of information and continue coordinating activities

d. Request information and keep up to date with regard to programmes implemented by HAMAG BICRO, for instance, the published Open call for expression of interest to participate in the implementation of the Individual Guarantees for Rural Development Programme, which is co-financed by the European Agricultural Fund for Rural Development (https://hamagbicro.hr/javni-poziv-pojedinacna-jamstva-za-ruralni-razvoj/).

https://razvoj.gov.hr/UserDocsImages/Istaknute%20teme/Iskori%C5%A1tenost%20EU%20fondova%20po%20%C5%BEupanijama_2018.pdf

https://razvoj.gov.hr/UserDocsImages/Istaknute%20teme/Iskori%C5%A1tenost%20EU%20fondova%20po%20%C5%BEupanijama_2018.pdf

https://hamagbicro.hr/javni-poziv-pojedinacna-jamstva-za-ruralni-razvoj/

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A 10. 3. Stakeholders County Coordination, SI. A 10.4. Time-frame The measure is active until 2023, that is, by the end of the implementation of the operational programmes from the EU financial perspective for 2014-2020. A 10.5. Necessary funds The funds have been secured in the framework of the regular PORA activities on the grounds of its coordinating function.

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